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. Keeping this in mind let’s see whether CoStar Group Inc (NASDAQ:CSGP) 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 CoStar Group Inc (NASDAQ:CSGP) the right investment to pursue these days? The smart money is taking a bullish view. The number of bullish hedge fund positions advanced by 5 in recent months. Our calculations also showed that CSGP 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.
To most market participants, hedge funds are viewed as underperforming, old investment vehicles of the past. While there are greater than 8000 funds trading at the moment, Our experts choose to focus on the elite of this group, around 850 funds. These hedge fund managers handle most of all hedge funds’ total capital, and by keeping an eye on their top investments, Insider Monkey has found a number of investment strategies that have historically exceeded the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
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. Now we’re going to take a gander at the fresh hedge fund action regarding CoStar Group Inc (NASDAQ:CSGP).
How are hedge funds trading CoStar Group Inc (NASDAQ:CSGP)?
Heading into the first quarter of 2020, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CSGP over the last 18 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Select Equity Group, managed by Robert Joseph Caruso, holds the number one position in CoStar Group Inc (NASDAQ:CSGP). Select Equity Group has a $449.5 million position in the stock, comprising 2.8% of its 13F portfolio. The second most bullish fund manager is Gabriel Plotkin of Melvin Capital Management, with a $349.1 million position; 2.9% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism contain Brian Bares’s Bares Capital Management, Charles Akre’s Akre Capital Management and Robert Boucai’s Newbrook Capital Advisors. In terms of the portfolio weights assigned to each position Wildcat Capital Management allocated the biggest weight to CoStar Group Inc (NASDAQ:CSGP), around 16.81% of its 13F portfolio. Newbrook Capital Advisors is also relatively very bullish on the stock, setting aside 9.13 percent of its 13F equity portfolio to CSGP.
Consequently, specific money managers have been driving this bullishness. Akre Capital Management, managed by Charles Akre, created the most outsized position in CoStar Group Inc (NASDAQ:CSGP). Akre Capital Management had $149.6 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also initiated a $43.1 million position during the quarter. The following funds were also among the new CSGP investors: Leon Shaulov’s Maplelane Capital, Mikal Patel’s Oribel Capital Management, and Anthony Joseph Vaccarino’s North Fourth Asset Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as CoStar Group Inc (NASDAQ:CSGP) but similarly valued. These stocks are Hartford Financial Services Group Inc (NYSE:HIG), MSCI Inc (NYSE:MSCI), Fifth Third Bancorp (NASDAQ:FITB), and Ventas, Inc. (NYSE:VTR). All of these stocks’ market caps match CSGP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HIG | 34 | 738852 | -2 |
| MSCI | 42 | 729773 | 2 |
| FITB | 41 | 845596 | 1 |
| VTR | 29 | 655629 | 13 |
| Average | 36.5 | 742463 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.5 hedge funds with bullish positions and the average amount invested in these stocks was $742 million. That figure was $1730 million in CSGP’s case. MSCI Inc (NYSE:MSCI) is the most popular stock in this table. On the other hand Ventas, Inc. (NYSE:VTR) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks CoStar Group Inc (NASDAQ:CSGP) is more popular among hedge funds. 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 11.7% in 2020 through March 11th but still managed to beat the market by 3.1 percentage points. Hedge funds were also right about betting on CSGP as the stock returned 8.9% so far in Q1 (through March 11th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
