Hedge Funds Are Crazy About Copart, Inc. (CPRT)

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.

Copart, Inc. (NASDAQ:CPRT) was in 34 hedge funds’ portfolios at the end of September. CPRT shareholders have witnessed an increase in enthusiasm from smart money in recent months. There were 26 hedge funds in our database with CPRT holdings at the end of the previous quarter. At the end of this article we will also compare CPRT to other stocks including Assurant, Inc. (NYSE:AIZ), JetBlue Airways Corporation (NASDAQ:JBLU), and Post Holdings Inc (NYSE:POST) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Now, let’s take a look at the key action encompassing Copart, Inc. (NASDAQ:CPRT).

How are hedge funds trading Copart, Inc. (NASDAQ:CPRT)?

Heading into the fourth quarter of 2016, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a jump of 31% from the second quarter of 2016. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce’s Royce & Associates has the biggest position in Copart, Inc. (NASDAQ:CPRT), worth close to $127.3 million and comprising 0.8% of its total 13F portfolio. The second most bullish fund manager is Foundation Asset Management, led by David Charney and Sky Wilber, holding a $56.9 million position; 19.3% of its 13F portfolio is allocated to the stock. Other peers with similar optimism comprise Jeff Lignelli’s Incline Global Management, James Crichton’s Hitchwood Capital Management and Jim Simons’s Renaissance Technologies.

With a general bullishness amongst the heavyweights, key hedge funds have jumped into Copart, Inc. (NASDAQ:CPRT) headfirst. Hitchwood Capital Management, run by James Crichton, established the biggest position in Copart, Inc. (NASDAQ:CPRT). The fund had $21.5 million invested in the company at the end of the quarter according to regulatory filings. Jim Simons’s Renaissance Technologies also made a $17 million investment in the stock during the quarter. The following funds were also among the new CPRT investors: Panayotis Takis Sparaggis’s Alkeon Capital Management, Dmitry Balyasny’s Balyasny Asset Management, and Ken Griffin’s Citadel Investment Group.

Let’s now take a look at hedge fund activity in other stocks similar to Copart, Inc. (NASDAQ:CPRT). These stocks are Assurant, Inc. (NYSE:AIZ), JetBlue Airways Corporation (NASDAQ:JBLU), Post Holdings Inc (NYSE:POST), and Calpine Corporation (NYSE:CPN). All of these stocks’ market caps are closest to CPRT’s market cap.

As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $774 million. That figure was $349 million in CPRT’s case. Post Holdings Inc (NYSE:POST) is the most popular stock in this table. On the other hand Assurant, Inc. (NYSE:AIZ) is the least popular one with only 16 bullish hedge fund positions. Copart, Inc. (NASDAQ:CPRT) 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 POST might be a better candidate to consider a long position.

Disclosure: none.