With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Carnival plc (NYSE:CUK).
Is Carnival plc (NYSE:CUK) a safe investment now? Prominent investors are getting more optimistic. The number of long hedge fund positions advanced by 1 lately. Our calculations also showed that CUK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 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 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.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s take a glance at the latest hedge fund action encompassing Carnival plc (NYSE:CUK).
Hedge fund activity in Carnival plc (NYSE:CUK)
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CUK over the last 17 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
The largest stake in Carnival plc (NYSE:CUK) was held by Arrowstreet Capital, which reported holding $58.1 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $35.7 million position. Other investors bullish on the company included Marshall Wace, Millennium Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Ionic Capital Management allocated the biggest weight to Carnival plc (NYSE:CUK), around 0.2% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, dishing out 0.14 percent of its 13F equity portfolio to CUK.
With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Hudson Bay Capital Management, managed by Sander Gerber, initiated the most valuable position in Carnival plc (NYSE:CUK). Hudson Bay Capital Management had $3.7 million invested in the company at the end of the quarter. Michael Hintze’s CQS Cayman LP also made a $1.2 million investment in the stock during the quarter. The other funds with brand new CUK positions are Matthew Hulsizer’s PEAK6 Capital Management and Steve Cohen’s Point72 Asset Management.
Let’s also examine hedge fund activity in other stocks similar to Carnival plc (NYSE:CUK). We will take a look at PT Telekomunikasi Indonesia (NYSE:TLK), Ingersoll-Rand Plc (NYSE:IR), Paychex, Inc. (NASDAQ:PAYX), and MPLX LP (NYSE:MPLX). This group of stocks’ market values are similar to CUK’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TLK | 7 | 153279 | 0 |
| IR | 40 | 1724549 | 0 |
| PAYX | 28 | 871198 | -6 |
| MPLX | 13 | 486509 | 2 |
| Average | 22 | 808884 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $809 million. That figure was $143 million in CUK’s case. Ingersoll-Rand Plc (NYSE:IR) is the most popular stock in this table. On the other hand PT Telekomunikasi Indonesia (NYSE:TLK) is the least popular one with only 7 bullish hedge fund positions. Carnival plc (NYSE:CUK) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately CUK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CUK investors were disappointed as the stock returned 2.5% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
