Hedge Funds Are Selling CorVel Corporation (CRVL)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtCorVel Corporation (NASDAQ:CRVL) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

CorVel Corporation (NASDAQ:CRVL) was in 12 hedge funds’ portfolios at the end of March. CRVL investors should be aware of a decrease in support from the world’s most elite money managers of late. There were 14 hedge funds in our database with CRVL positions at the end of the previous quarter. Our calculations also showed that CRVL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 58 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Noam Gottesman of GLG Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to view the recent hedge fund action surrounding CorVel Corporation (NASDAQ:CRVL).

What have hedge funds been doing with CorVel Corporation (NASDAQ:CRVL)?

Heading into the second quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in CRVL a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

The largest stake in CorVel Corporation (NASDAQ:CRVL) was held by Renaissance Technologies, which reported holding $68.6 million worth of stock at the end of September. It was followed by AQR Capital Management with a $7.5 million position. Other investors bullish on the company included Citadel Investment Group, GLG Partners, and Millennium Management. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to CorVel Corporation (NASDAQ:CRVL), around 0.45% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.07 percent of its 13F equity portfolio to CRVL.

Seeing as CorVel Corporation (NASDAQ:CRVL) has experienced falling interest from the smart money, it’s safe to say that there lies a certain “tier” of hedge funds who sold off their positions entirely by the end of the first quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management cut the largest stake of the “upper crust” of funds tracked by Insider Monkey, totaling about $0.2 million in stock, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors was right behind this move, as the fund dropped about $0.2 million worth. These transactions are important to note, as total hedge fund interest fell by 2 funds by the end of the first quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as CorVel Corporation (NASDAQ:CRVL) but similarly valued. We will take a look at Silk Road Medical, Inc. (NASDAQ:SILK), Getty Realty Corp. (NYSE:GTY), Mednax Inc. (NYSE:MD), and Akebia Therapeutics Inc (NASDAQ:AKBA). This group of stocks’ market caps are closest to CRVL’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $179 million. That figure was $88 million in CRVL’s case. Mednax Inc. (NYSE:MD) is the most popular stock in this table. On the other hand Getty Realty Corp. (NYSE:GTY) is the least popular one with only 9 bullish hedge fund positions. CorVel Corporation (NASDAQ:CRVL) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on CRVL as the stock returned 30% during the second quarter and outperformed the market by an even larger margin.

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