A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended March 31st, so let’s proceed with the discussion of the hedge fund sentiment on CoStar Group Inc (NASDAQ:CSGP).
CoStar Group Inc (NASDAQ:CSGP) has experienced a decrease in support from the world’s most elite money managers recently. CoStar Group Inc (NASDAQ:CSGP) was in 43 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 55. Our calculations also showed that CSGP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 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 115 percentage points since March 2017 (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.
Dan Loeb of Third Point
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. With all of this in mind let’s take a look at the key hedge fund action surrounding CoStar Group Inc (NASDAQ:CSGP).
Do Hedge Funds Think CSGP Is A Good Stock To Buy Now?
At the end of March, a total of 43 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CSGP over the last 23 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Among these funds, Akre Capital Management held the most valuable stake in CoStar Group Inc (NASDAQ:CSGP), which was worth $803 million at the end of the fourth quarter. On the second spot was Third Point which amassed $452 million worth of shares. Alkeon Capital Management, Bares Capital Management, and Pelham Capital 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 Pelham Capital allocated the biggest weight to CoStar Group Inc (NASDAQ:CSGP), around 10.64% of its 13F portfolio. Lakehouse Capital is also relatively very bullish on the stock, earmarking 8.47 percent of its 13F equity portfolio to CSGP.
Judging by the fact that CoStar Group Inc (NASDAQ:CSGP) has faced bearish sentiment from the smart money, it’s easy to see that there were a few money managers that decided to sell off their positions entirely by the end of the first quarter. Interestingly, Robert Joseph Caruso’s Select Equity Group cut the biggest stake of the “upper crust” of funds tracked by Insider Monkey, valued at about $115.9 million in stock. Andreas Halvorsen’s fund, Viking Global, also said goodbye to its stock, about $65.6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 8 funds by the end of the first quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as CoStar Group Inc (NASDAQ:CSGP) but similarly valued. These stocks are TAL Education Group (NYSE:TAL), PACCAR Inc (NASDAQ:PCAR), TransDigm Group Incorporated (NYSE:TDG), Brown-Forman Corporation (NYSE:BF), Suncor Energy Inc. (NYSE:SU), BeiGene, Ltd. (NASDAQ:BGNE), and Archer Daniels Midland Company (NYSE:ADM). This group of stocks’ market valuations are closest to CSGP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TAL | 38 | 1373412 | 9 |
| PCAR | 28 | 626282 | -6 |
| TDG | 62 | 6290864 | -2 |
| BF | 35 | 1477271 | 6 |
| SU | 33 | 1047702 | 8 |
| BGNE | 19 | 6242377 | -2 |
| ADM | 34 | 696043 | -1 |
| Average | 35.6 | 2536279 | 1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.6 hedge funds with bullish positions and the average amount invested in these stocks was $2536 million. That figure was $2785 million in CSGP’s case. TransDigm Group Incorporated (NYSE:TDG) is the most popular stock in this table. On the other hand BeiGene, Ltd. (NASDAQ:BGNE) is the least popular one with only 19 bullish hedge fund positions. CoStar Group Inc (NASDAQ:CSGP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CSGP is 48.4. 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 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Hedge funds were also right about betting on CSGP, though not to the same extent, as the stock returned 6.9% since Q1 (through June 18th) and outperformed the market as well.
Follow Costar Group Inc. (NASDAQ:CSGP)
Follow Costar Group Inc. (NASDAQ:CSGP)
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Disclosure: None. This article was originally published at Insider Monkey.
