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. Keeping this in mind let’s see whether Cimpress NV (NASDAQ:CMPR) represents a good buying opportunity at the moment. Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Is Cimpress NV (NASDAQ:CMPR) a buy here? Hedge funds are becoming more confident. The number of long hedge fund bets increased by 6 lately. Our calculations also showed that CMPR 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). CMPR was in 18 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 12 hedge funds in our database with CMPR holdings at the end of the previous quarter.
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 S&P 500 ETFs by 41 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.
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. With all of this in mind we’re going to take a glance at the new hedge fund action encompassing Cimpress NV (NASDAQ:CMPR).
Hedge fund activity in Cimpress NV (NASDAQ:CMPR)
At the end of the fourth quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in CMPR a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Among these funds, Spruce House Investment Management held the most valuable stake in Cimpress NV (NASDAQ:CMPR), which was worth $296.7 million at the end of the third quarter. On the second spot was Arlington Value Capital which amassed $251 million worth of shares. D E Shaw, Bares Capital Management, and GLG Partners 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 Arlington Value Capital allocated the biggest weight to Cimpress NV (NASDAQ:CMPR), around 17.05% of its 13F portfolio. Spruce House Investment Management is also relatively very bullish on the stock, earmarking 9.69 percent of its 13F equity portfolio to CMPR.
As one would reasonably expect, key money managers have jumped into Cimpress NV (NASDAQ:CMPR) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the largest position in Cimpress NV (NASDAQ:CMPR). Arrowstreet Capital had $13.4 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $5.8 million position during the quarter. The following funds were also among the new CMPR investors: Ken Griffin’s Citadel Investment Group, Donald Sussman’s Paloma Partners, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s also examine hedge fund activity in other stocks similar to Cimpress NV (NASDAQ:CMPR). We will take a look at Equitrans Midstream Corporation (NYSE:ETRN), Graham Holdings Co (NYSE:GHC), Taro Pharmaceutical Industries Ltd. (NYSE:TARO), and Inphi Corporation (NYSE:IPHI). This group of stocks’ market values are similar to CMPR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ETRN | 15 | 379764 | -2 |
| GHC | 18 | 510146 | 0 |
| TARO | 12 | 83139 | 1 |
| IPHI | 31 | 449813 | 0 |
| Average | 19 | 355716 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $356 million. That figure was $708 million in CMPR’s case. Inphi Corporation (NYSE:IPHI) is the most popular stock in this table. On the other hand Taro Pharmaceutical Industries Ltd. (NYSE:TARO) is the least popular one with only 12 bullish hedge fund positions. Cimpress NV (NASDAQ:CMPR) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately CMPR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CMPR investors were disappointed as the stock returned -46.7% 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 in Q1.
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.
