Hedge Funds Aren’t Crazy About CA, Inc. (CA) Anymore

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 5.2% over the 12-month period ending October 30, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey (as of September 2014) generated a return of 9.5% over the same time span, with 63% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized in financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in CA, Inc. (NASDAQ:CA).

CA, Inc. (NASDAQ:CA) shareholders have witnessed a decrease in hedge fund sentiment lately. At the end of this article we will also compare CA to other stocks including Nucor Corporation (NYSE:NUE), Spectra Energy Partners, LP (NYSE:SEP), and Liberty Media Corp (NASDAQ:LMCA) to get a better sense of its popularity.

At the moment there are plenty of methods stock traders have at their disposal to analyze publicly traded companies. A duo of the most underrated methods is composed of hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the best fund managers can trounce their index-focused peers by a very impressive margin (see the details here).

With all of this in mind, let’s take a gander at the recent action encompassing CA, Inc. (NASDAQ:CA).

Hedge fund activity in CA, Inc. (NASDAQ:CA)

Heading into Q4, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from one quarter earlier. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Huber Capital Management, managed by Joe Huber, holds the biggest position in CA, Inc. (NASDAQ:CA). Huber Capital Management has a $83.1 million position in the stock, comprising 2.9% of its 13F portfolio. The second most bullish fund manager is AQR Capital Management, managed by Cliff Asness, which holds a $74.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions encompass David Harding’s Winton Capital Management, Joel Greenblatt’s Gotham Asset Management and Ray Dalio’s Bridgewater Associates.

Seeing as CA, Inc. (NASDAQ:CA) has faced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of hedgies who were dropping their entire stakes by the end of the third quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management sold off the largest stake of the “upper crust” of funds monitored by Insider Monkey, valued at about $11.7 million in stock, and Neil Chriss’s Hutchin Hill Capital was right behind this move, as the fund sold off about $3 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as CA, Inc. (NASDAQ:CA) but similarly valued. We will take a look at Nucor Corporation (NYSE:NUE), Spectra Energy Partners, LP (NYSE:SEP), Liberty Media Corp (NASDAQ:LMCA), and Tesoro Corporation (NYSE:TSO). This group of stocks’ market values are similar to CA’s market value.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $942 million. That figure was $343 million in CA’s case. Tesoro Corporation (NYSE:TSO) is the most popular stock in this table. On the other hand, Spectra Energy Partners, LP (NYSE:SEP) is the least popular one. CA, Inc. (NASDAQ:CA), with 25 bullish hedge fund positions, is not the least popular stock in this group, but hedge fund interest is still below average. This may indicate that it is not a stock worth considering; therefore, we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, TSO might be a better candidate to consider a long position.