Hedge Funds Are Piling Into CAI International Inc (CAI)

In this article we will check out the progression of hedge fund sentiment towards CAI International Inc (NYSE:CAI) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

CAI International Inc (NYSE:CAI) investors should be aware of an increase in hedge fund sentiment of late. CAI International Inc (NYSE:CAI) was in 24 hedge funds’ portfolios at the end of June. The all time high for this statistic was previously 17. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CAI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

To most market participants, hedge funds are viewed as underperforming, old investment vehicles of yesteryear. While there are more than 8000 funds with their doors open at the moment, Our experts look at the aristocrats of this club, about 850 funds. These hedge fund managers watch over most of the smart money’s total capital, and by tracking their unrivaled stock picks, Insider Monkey has brought to light several investment strategies that have historically outperformed Mr. Market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Clint Carlson of Carlson Capital

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

Heading into the third quarter of 2021, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 41% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in CAI over the last 24 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

Among these funds, Magnetar Capital held the most valuable stake in CAI International Inc (NYSE:CAI), which was worth $71.2 million at the end of the second quarter. On the second spot was Millennium Management which amassed $36.6 million worth of shares. Water Island Capital, Pentwater Capital Management, and Carlson 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 Water Island Capital allocated the biggest weight to CAI International Inc (NYSE:CAI), around 1.37% of its 13F portfolio. Magnetar Capital is also relatively very bullish on the stock, dishing out 0.67 percent of its 13F equity portfolio to CAI.

Now, some big names have jumped into CAI International Inc (NYSE:CAI) headfirst. Magnetar Capital, managed by Alec Litowitz and Ross Laser, initiated the most outsized position in CAI International Inc (NYSE:CAI). Magnetar Capital had $71.2 million invested in the company at the end of the quarter. John Orrico’s Water Island Capital also initiated a $25.9 million position during the quarter. The following funds were also among the new CAI investors: Matthew Halbower’s Pentwater Capital Management, Clint Carlson’s Carlson Capital, and Paul Glazer’s Glazer Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as CAI International Inc (NYSE:CAI) but similarly valued. We will take a look at Chase Corporation (NYSE:CCF), Mesoblast Limited (NASDAQ:MESO), Silvercorp Metals Inc. (NYSE:SVM), Kearny Financial Corp. (NASDAQ:KRNY), Resolute Forest Products Inc (NYSE:RFP), Zogenix, Inc. (NASDAQ:ZGNX), and Standard Motor Products, Inc. (NYSE:SMP). This group of stocks’ market values are similar to CAI’s market value.

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As you can see these stocks had an average of 14.4 hedge funds with bullish positions and the average amount invested in these stocks was $166 million. That figure was $211 million in CAI’s case. Zogenix, Inc. (NASDAQ:ZGNX) is the most popular stock in this table. On the other hand Mesoblast Limited (NASDAQ:MESO) is the least popular one with only 2 bullish hedge fund positions. CAI International Inc (NYSE:CAI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CAI is 82.3. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately CAI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CAI were disappointed as the stock returned 0.4% since the end of June (through 10/22) 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 many of these stocks already outperformed the market since 2019.

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