We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Cardtronics plc (NASDAQ:CATM).
Cardtronics plc (NASDAQ:CATM) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 19 hedge funds’ portfolios at the end of September. At the end of this article we will also compare CATM to other stocks including Kite Realty Group Trust (NYSE:KRG), Gentherm Inc (NASDAQ:THRM), and Viad Corp (NYSE:VVI) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Chuck Royce of Royce & Associates
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the latest hedge fund action encompassing Cardtronics plc (NASDAQ:CATM).
What have hedge funds been doing with Cardtronics plc (NASDAQ:CATM)?
Heading into the fourth quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CATM over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Hudson Executive Capital held the most valuable stake in Cardtronics plc (NASDAQ:CATM), which was worth $245.8 million at the end of the third quarter. On the second spot was D E Shaw which amassed $36 million worth of shares. Renaissance Technologies, Arrowstreet Capital, and Two Sigma Advisors 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 Hudson Executive Capital allocated the biggest weight to Cardtronics plc (NASDAQ:CATM), around 18.59% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, earmarking 0.43 percent of its 13F equity portfolio to CATM.
Since Cardtronics plc (NASDAQ:CATM) has faced a decline in interest from hedge fund managers, it’s safe to say that there lies a certain “tier” of money managers that slashed their full holdings in the third quarter. It’s worth mentioning that Nick Niell’s Arrowgrass Capital Partners dumped the largest investment of the 750 funds watched by Insider Monkey, comprising an estimated $15.7 million in stock, and Andrew Weiss’s Weiss Asset Management was right behind this move, as the fund dropped about $1.4 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Cardtronics plc (NASDAQ:CATM) but similarly valued. We will take a look at Kite Realty Group Trust (NYSE:KRG), Gentherm Inc (NASDAQ:THRM), Viad Corp (NYSE:VVI), and CNX Resources Corporation (NYSE:CNX). This group of stocks’ market values are similar to CATM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KRG | 10 | 60361 | 4 |
| THRM | 15 | 67220 | 0 |
| VVI | 15 | 109600 | -1 |
| CNX | 20 | 527661 | -1 |
| Average | 15 | 191211 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $191 million. That figure was $352 million in CATM’s case. CNX Resources Corporation (NYSE:CNX) is the most popular stock in this table. On the other hand Kite Realty Group Trust (NYSE:KRG) is the least popular one with only 10 bullish hedge fund positions. Cardtronics plc (NASDAQ:CATM) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on CATM as the stock returned 39.6% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
