Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze CalAtlantic Group Inc (NYSE:CAA) from the perspective of those successful funds.
CalAtlantic Group Inc (NYSE:CAA) has experienced an increase in hedge fund interest recently. CAA was in 36 hedge funds’ portfolios at the end of September. There were 33 hedge funds in our database with CAA positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Columbia Sportswear Company (NASDAQ:COLM), Healthcare Realty Trust Inc (NYSE:HR), and IDACORP Inc (NYSE:IDA) to gather more data points.
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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What does the smart money think about CalAtlantic Group Inc (NYSE:CAA)?
At the end of the third quarter, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a gain of 9% from the second quarter of 2016. By comparison, 29 hedge funds held shares or bullish call options in CAA heading into this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ricky Sandler’s Eminence Capital has the biggest position in CalAtlantic Group Inc (NYSE:CAA), worth close to $190.5 million, comprising 3.2% of its total 13F portfolio. Coming in second is Fisher Asset Management, led by Ken Fisher, holding a $77.8 million position. Other hedge funds and institutional investors with similar optimism comprise Edgar Wachenheim’s Greenhaven Associates, Thomas E. Claugus’ GMT Capital and Robert Bishop’s Impala Asset Management. We should note that Impala Asset Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now, key hedge funds were leading the bulls’ herd. Long Pond Capital, led by John Khoury, initiated the biggest position in CalAtlantic Group Inc (NYSE:CAA). Long Pond Capital had $18.1 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also made a $4.1 million investment in the stock during the quarter. The other funds with new positions in the stock are George Hall’s Clinton Group, Mike Vranos’ Ellington, and Matthew Tewksbury’s Stevens Capital Management.
Let’s also examine hedge fund activity in other stocks similar to CalAtlantic Group Inc (NYSE:CAA). These stocks are Columbia Sportswear Company (NASDAQ:COLM), Healthcare Realty Trust Inc (NYSE:HR), IDACORP Inc (NYSE:IDA), and Western Alliance Bancorporation (NYSE:WAL). This group of stocks’ market caps resemble CAA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| COLM | 17 | 107668 | -3 |
| HR | 6 | 103017 | -5 |
| IDA | 6 | 96192 | -4 |
| WAL | 26 | 249621 | -8 |
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $139 million. That figure was $630 million in CAA’s case. Western Alliance Bancorporation (NYSE:WAL) is the most popular stock in this table. On the other hand Healthcare Realty Trust Inc (NYSE:HR) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks CalAtlantic Group Inc (NYSE:CAA) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None
