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. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent 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 funds think of Cree, Inc. (NASDAQ:CREE) based on that data.
Cree, Inc. (NASDAQ:CREE) was in 25 hedge funds’ portfolios at the end of December. CREE investors should pay attention to an increase in enthusiasm from smart money in recent months. There were 23 hedge funds in our database with CREE holdings at the end of the previous quarter. Our calculations also showed that CREE 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 today’s marketplace there are several methods stock traders put to use to size up their holdings. A couple of the most under-the-radar methods are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the top fund managers can outclass the market by a solid margin (see the details here).
David E. Shaw of D.E. Shaw
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 let’s review the key hedge fund action regarding Cree, Inc. (NASDAQ:CREE).
Hedge fund activity in Cree, Inc. (NASDAQ:CREE)
At Q4’s end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in CREE a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Iridian Asset Management held the most valuable stake in Cree, Inc. (NASDAQ:CREE), which was worth $96.4 million at the end of the third quarter. On the second spot was D E Shaw which amassed $52 million worth of shares. Renaissance Technologies, Two Sigma Advisors, and Crake 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 AlphaOne Capital Partners allocated the biggest weight to Cree, Inc. (NASDAQ:CREE), around 2.1% of its 13F portfolio. Crake Asset Management is also relatively very bullish on the stock, setting aside 1.81 percent of its 13F equity portfolio to CREE.
As one would reasonably expect, specific money managers have been driving this bullishness. Crake Asset Management, managed by Martin Taylor, established the most valuable position in Cree, Inc. (NASDAQ:CREE). Crake Asset Management had $8.9 million invested in the company at the end of the quarter. Michael Rockefeller and Karl Kroeker’s Woodline Partners also made a $7.5 million investment in the stock during the quarter. The following funds were also among the new CREE investors: Bruce Kovner’s Caxton Associates LP, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Nick Thakore’s Diametric Capital.
Let’s go over hedge fund activity in other stocks similar to Cree, Inc. (NASDAQ:CREE). We will take a look at Pan American Silver Corp. (NASDAQ:PAAS), LG Display Co Ltd. (NYSE:LPL), Seaboard Corporation (NYSE:SEB), and MGIC Investment Corporation (NYSE:MTG). This group of stocks’ market values resemble CREE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PAAS | 30 | 447399 | 7 |
| LPL | 3 | 5937 | 0 |
| SEB | 18 | 153985 | 2 |
| MTG | 37 | 604228 | -4 |
| Average | 22 | 302887 | 1.25 |
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 $303 million. That figure was $284 million in CREE’s case. MGIC Investment Corporation (NYSE:MTG) is the most popular stock in this table. On the other hand LG Display Co Ltd. (NYSE:LPL) is the least popular one with only 3 bullish hedge fund positions. Cree, Inc. (NASDAQ:CREE) is not the most popular stock in this group but hedge fund interest is still above average. 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 still beat the market by 5.5 percentage points. Hedge funds were also right about betting on CREE as the stock returned -16.9% during the first quarter (through March 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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.
