We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards CBS Corporation (NYSE:CBS).
CBS Corporation (NYSE:CBS) shareholders have witnessed an increase in hedge fund sentiment of late. CBS was in 45 hedge funds’ portfolios at the end of the third quarter of 2018. There were 39 hedge funds in our database with CBS holdings at the end of the previous quarter. Our calculations also showed that CBS isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to the beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We’re going to take a gander at the new hedge fund action surrounding CBS Corporation (NYSE:CBS).
How have hedgies been trading CBS Corporation (NYSE:CBS)?
At Q3’s end, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the second quarter of 2018. By comparison, 47 hedge funds held shares or bullish call options in CBS heading into this year. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
The largest stake in CBS Corporation (NYSE:CBS) was held by Glenview Capital, which reported holding $245 million worth of stock at the end of September. It was followed by Tremblant Capital with a $169.4 million position. Other investors bullish on the company included Chieftain Capital, Gruss Asset Management, and Maverick Capital.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Maverick Capital, managed by Lee Ainslie, created the largest position in CBS Corporation (NYSE:CBS). Maverick Capital had $133.5 million invested in the company at the end of the quarter. Seth Wunder’s Black-and-White Capital also made a $57.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, and Ike Kier and Ilya Zaides’s KG Funds Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as CBS Corporation (NYSE:CBS) but similarly valued. These stocks are Twitter Inc (NYSE:TWTR), Lululemon Athletica inc. (NASDAQ:LULU), Hess Corporation (NYSE:HES), and The Hershey Company (NYSE:HSY). All of these stocks’ market caps are similar to CBS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TWTR | 42 | 1074408 | 2 |
| LULU | 45 | 1651249 | 4 |
| HES | 37 | 2364508 | 5 |
| HSY | 29 | 448888 | 4 |
| Average | 38.25 | 1385 | 3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.25 hedge funds with bullish positions and the average amount invested in these stocks was $1.39 billion. That figure was $1.34 billion in CBS’s case. Lululemon Athletica inc. (NASDAQ:LULU) is the most popular stock in this table. On the other hand The Hershey Company (NYSE:HSY) is the least popular one with only 29 bullish hedge fund positions. CBS Corporation (NYSE:CBS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard LULU might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
