Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the third quarter we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Carnival plc (ADR) (NYSE:CUK) to find out whether it was one of their high conviction long-term ideas.
Is Carnival plc (ADR) (NYSE:CUK) a healthy stock for your portfolio? Hedge funds are becoming hopeful. The number of long hedge fund positions rose by 2 recently. 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 Dominion Resources, Inc. (NYSE:D), Phillips 66 (NYSE:PSX), and Shire PLC (ADR) (NASDAQ:SHPG) to gather more data points.
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In the financial world there are several indicators shareholders can use to appraise publicly traded companies. A pair of the best indicators are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the best hedge fund managers can outperform the S&P 500 by a healthy margin (see the details here).
With all of this in mind, we’re going to take a look at the new action surrounding Carnival plc (ADR) (NYSE:CUK).
What does the smart money think about Carnival plc (ADR) (NYSE:CUK)?
At the Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from one quarter earlier. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the largest position in Carnival plc (ADR) (NYSE:CUK), worth close to $29 million, comprising 0.1% of its total 13F portfolio. Coming in second is Millennium Management, managed by Israel Englander, which holds a $4.6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism contain Robert B. Gillam’s McKinley Capital Management, Bart Baum’s Ionic Capital Management and D. E. Shaw’s D E Shaw.
Now, key hedge funds were leading the bulls’ herd. McKinley Capital Management assembled the biggest position in Carnival plc (ADR) (NYSE:CUK). McKinley Capital Management had $1.1 million invested in the company at the end of the quarter. Ionic Capital Management also initiated a $0.7 million position during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors and Matthew Tewksbury’s Stevens Capital Management.
Let’s go over hedge fund activity in other stocks similar to Carnival plc (ADR) (NYSE:CUK). These stocks are Dominion Resources, Inc. (NYSE:D), Phillips 66 (NYSE:PSX), Shire PLC (ADR) (NASDAQ:SHPG), and Adobe Systems Incorporated (NASDAQ:ADBE). This group of stocks’ market values resemble CUK’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| D | 24 | 397459 | 2 |
| PSX | 33 | 6722714 | -2 |
| SHPG | 43 | 2498587 | -1 |
| ADBE | 42 | 4069926 | 3 |
As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $3.42 billion. That figure was just $37 million in CUK’s case. Shire PLC (ADR) (NASDAQ:SHPG) is the most popular stock in this table, while Dominion Resources, Inc. (NYSE:D) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks, Carnival plc (ADR) (NYSE:CUK) is even less popular than D. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
