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. The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 835 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Cardtronics plc (NASDAQ:CATM) based on those filings.
Cardtronics plc (NASDAQ:CATM) was in 22 hedge funds’ portfolios at the end of December. CATM investors should pay attention to an increase in hedge fund interest lately. There were 21 hedge funds in our database with CATM holdings at the end of the previous quarter. Our calculations also showed that CATM 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).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Bruce Kovner of Caxton Associates LP
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Now we’re going to view the latest hedge fund action encompassing Cardtronics plc (NASDAQ:CATM).
What does smart money think about Cardtronics plc (NASDAQ:CATM)?
At the end of the fourth quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CATM over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Douglas Braunstein and James Woolery’s Hudson Executive Capital has the most valuable position in Cardtronics plc (NASDAQ:CATM), worth close to $362.9 million, accounting for 32.3% of its total 13F portfolio. The second largest stake is held by D E Shaw, led by D. E. Shaw, holding a $60.4 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that hold long positions contain Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Hudson Executive Capital allocated the biggest weight to Cardtronics plc (NASDAQ:CATM), around 32.3% of its 13F portfolio. AlphaOne Capital Partners is also relatively very bullish on the stock, earmarking 0.58 percent of its 13F equity portfolio to CATM.
As aggregate interest increased, some big names have been driving this bullishness. Winton Capital Management, managed by David Harding, initiated the most valuable position in Cardtronics plc (NASDAQ:CATM). Winton Capital Management had $6.8 million invested in the company at the end of the quarter. Bruce Kovner’s Caxton Associates LP also initiated a $0.4 million position during the quarter. The only other fund with a new position in the stock is Mike Vranos’s Ellington.
Let’s also examine hedge fund activity in other stocks similar to Cardtronics plc (NASDAQ:CATM). We will take a look at Adient plc (NYSE:ADNT), Cubic Corporation (NYSE:CUB), Vector Group Ltd (NYSE:VGR), and Caretrus REIT Inc (NASDAQ:CTRE). This group of stocks’ market valuations are similar to CATM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ADNT | 36 | 521141 | 9 |
| CUB | 19 | 43685 | 2 |
| VGR | 17 | 203826 | -2 |
| CTRE | 13 | 69296 | -3 |
| Average | 21.25 | 209487 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $209 million. That figure was $554 million in CATM’s case. Adient plc (NYSE:ADNT) is the most popular stock in this table. On the other hand Caretrus REIT Inc (NASDAQ:CTRE) is the least popular one with only 13 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. This is a slightly positive signal but 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 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately CATM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CATM were disappointed as the stock returned -54.4% 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 many of these stocks already outperformed the market so far this year.
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.
