Hedge Funds Are Crazy About Cinemark Holdings, Inc. (CNK)

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Cinemark Holdings, Inc. (NYSE:CNK).

Cinemark Holdings, Inc. (NYSE:CNK) has seen an increase in hedge fund sentiment lately. Cinemark Holdings, Inc. (NYSE:CNK) was in 32 hedge funds’ portfolios at the end of June. The all time high for this statistic was previously 30. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CNK isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to 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 S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Bernard Horn of Polaris Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s review the recent hedge fund action regarding Cinemark Holdings, Inc. (NYSE:CNK).

Do Hedge Funds Think CNK Is A Good Stock To Buy Now?

At the end of June, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from one quarter earlier. On the other hand, there were a total of 24 hedge funds with a bullish position in CNK a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Polaris Capital Management was the largest shareholder of Cinemark Holdings, Inc. (NYSE:CNK), with a stake worth $67.8 million reported as of the end of June. Trailing Polaris Capital Management was Two Sigma Advisors, which amassed a stake valued at $46.5 million. D E Shaw, Citadel Investment Group, and Impala Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Polaris Capital Management allocated the biggest weight to Cinemark Holdings, Inc. (NYSE:CNK), around 2.19% of its 13F portfolio. Impala Asset Management is also relatively very bullish on the stock, earmarking 1.69 percent of its 13F equity portfolio to CNK.

As aggregate interest increased, some big names have been driving this bullishness. Paloma Partners, managed by Donald Sussman, established the most outsized position in Cinemark Holdings, Inc. (NYSE:CNK). Paloma Partners had $2.7 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $1.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management, Karim Abbadi and Edward McBride’s Centiva Capital, and Minhua Zhang’s Weld Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to Cinemark Holdings, Inc. (NYSE:CNK). We will take a look at iRobot Corporation (NASDAQ:IRBT), Plexus Corp. (NASDAQ:PLXS), Allscripts Healthcare Solutions Inc (NASDAQ:MDRX), MYT Netherlands Parent B.V. (NYSE:MYTE), Cadence Bancorporation (NYSE:CADE), JELD-WEN Holding, Inc. (NYSE:JELD), and First Interstate Bancsystem Inc (NASDAQ:FIBK). This group of stocks’ market caps match CNK’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.6 hedge funds with bullish positions and the average amount invested in these stocks was $147 million. That figure was $316 million in CNK’s case. Cadence Bancorporation (NYSE:CADE) is the most popular stock in this table. On the other hand First Interstate Bancsystem Inc (NASDAQ:FIBK) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Cinemark Holdings, Inc. (NYSE:CNK) is more popular among hedge funds. Our overall hedge fund sentiment score for CNK is 87. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Unfortunately CNK wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CNK were disappointed as the stock returned -8.1% since the end of the second quarter (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.