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.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Copart, Inc. (NASDAQ:CPRT).
Copart, Inc. (NASDAQ:CPRT) shareholders have witnessed an increase in activity from the world’s largest hedge funds recently. CPRT was in 46 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 43 hedge funds in our database with CPRT holdings at the end of the previous quarter. Our calculations also showed that CPRT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
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 a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Steven Cohen of Point72 Asset Management
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. Keeping this in mind let’s take a peek at the recent hedge fund action encompassing Copart, Inc. (NASDAQ:CPRT).
What does smart money think about Copart, Inc. (NASDAQ:CPRT)?
Heading into the first quarter of 2020, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CPRT over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Among these funds, Melvin Capital Management held the most valuable stake in Copart, Inc. (NASDAQ:CPRT), which was worth $305 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $125.7 million worth of shares. Nitorum Capital, Citadel Investment Group, and Point72 Asset Management 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 Stony Point Capital allocated the biggest weight to Copart, Inc. (NASDAQ:CPRT), around 5.58% of its 13F portfolio. SkyTop Capital Management is also relatively very bullish on the stock, setting aside 4.24 percent of its 13F equity portfolio to CPRT.
As aggregate interest increased, specific money managers have jumped into Copart, Inc. (NASDAQ:CPRT) headfirst. Melvin Capital Management, managed by Gabriel Plotkin, created the biggest position in Copart, Inc. (NASDAQ:CPRT). Melvin Capital Management had $305 million invested in the company at the end of the quarter. Clint Carlson’s Carlson Capital also made a $16 million investment in the stock during the quarter. The other funds with brand new CPRT positions are Anthony Joseph Vaccarino’s North Fourth Asset Management, Richard Walters II’s Stony Point Capital, and Robert Pitts’s Steadfast Capital Management.
Let’s now review hedge fund activity in other stocks similar to Copart, Inc. (NASDAQ:CPRT). These stocks are Ameriprise Financial, Inc. (NYSE:AMP), IAC/InterActiveCorp (NASDAQ:IAC), Smith & Nephew plc (NYSE:SNN), and Synopsys, Inc. (NASDAQ:SNPS). This group of stocks’ market values are similar to CPRT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMP | 37 | 1122580 | 8 |
| IAC | 71 | 3319257 | 16 |
| SNN | 3 | 131490 | -3 |
| SNPS | 45 | 1164571 | 0 |
| Average | 39 | 1434475 | 5.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 39 hedge funds with bullish positions and the average amount invested in these stocks was $1434 million. That figure was $985 million in CPRT’s case. IAC/InterActiveCorp (NASDAQ:IAC) is the most popular stock in this table. On the other hand Smith & Nephew plc (NYSE:SNN) is the least popular one with only 3 bullish hedge fund positions. Copart, Inc. (NASDAQ:CPRT) 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 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately CPRT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CPRT were disappointed as the stock returned -26.8% 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.
Disclosure: None. This article was originally published at Insider Monkey.
