We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 835 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Companhia Brasileira de Distrib. (NYSE:CBD).
Is Companhia Brasileira de Distrib. (NYSE:CBD) a buy here? The best stock pickers are becoming less hopeful. The number of bullish hedge fund bets were cut by 2 recently. Our calculations also showed that CBD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
To most investors, hedge funds are perceived as slow, outdated investment tools of the past. While there are over 8000 funds with their doors open at the moment, Our experts look at the top tier of this group, approximately 850 funds. These money managers command most of the smart money’s total asset base, and by tailing their best investments, Insider Monkey has deciphered numerous investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Ken Fisher of Fisher Asset Management
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a glance at the recent hedge fund action regarding Companhia Brasileira de Distrib. (NYSE:CBD).
What does smart money think about Companhia Brasileira de Distrib. (NYSE:CBD)?
Heading into the first quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the third quarter of 2019. On the other hand, there were a total of 13 hedge funds with a bullish position in CBD a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Fisher Asset Management held the most valuable stake in Companhia Brasileira de Distrib. (NYSE:CBD), which was worth $25.2 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $6.7 million worth of shares. Indus Capital, Marshall Wace LLP, and Millennium 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 Indus Capital allocated the biggest weight to Companhia Brasileira de Distrib. (NYSE:CBD), around 1.14% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, designating 0.08 percent of its 13F equity portfolio to CBD.
Since Companhia Brasileira de Distrib. (NYSE:CBD) has witnessed bearish sentiment from the aggregate hedge fund industry, we can see that there is a sect of hedgies that slashed their positions entirely in the third quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital sold off the biggest position of the “upper crust” of funds monitored by Insider Monkey, worth close to $3.2 million in stock, and Ronald Hua’s Qtron Investments was right behind this move, as the fund dumped about $0.8 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 2 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to Companhia Brasileira de Distrib. (NYSE:CBD). We will take a look at Globus Medical Inc (NYSE:GMED), Casey’s General Stores, Inc. (NASDAQ:CASY), Western Alliance Bancorporation (NYSE:WAL), and AGCO Corporation (NYSE:AGCO). All of these stocks’ market caps are similar to CBD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GMED | 29 | 256883 | 5 |
| CASY | 22 | 142114 | 4 |
| WAL | 32 | 246148 | 3 |
| AGCO | 28 | 302528 | 1 |
| Average | 27.75 | 236918 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $237 million. That figure was $45 million in CBD’s case. Western Alliance Bancorporation (NYSE:WAL) is the most popular stock in this table. On the other hand Casey’s General Stores, Inc. (NASDAQ:CASY) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Companhia Brasileira de Distrib. (NYSE:CBD) is even less popular than CASY. Hedge funds dodged a bullet by taking a bearish stance towards CBD. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately CBD wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CBD investors were disappointed as the stock returned -43.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
