Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (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 analyze whether CSG Systems International, Inc. (NASDAQ:CSGS) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is CSG Systems International, Inc. (NASDAQ:CSGS) undervalued? Hedge funds are getting more optimistic. The number of bullish hedge fund positions inched up by 3 recently. Our calculations also showed that CSGS 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). CSGS was in 23 hedge funds’ portfolios at the end of December. There were 20 hedge funds in our database with CSGS holdings at the end of the previous quarter.
In the 21st century investor’s toolkit there are dozens of metrics market participants employ to value stocks. A duo of the most under-the-radar metrics are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the top fund managers can outperform their index-focused peers by a significant amount (see the details here).
Dmitry Balyasny of Balyasny Asset Management
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. 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. With all of this in mind we’re going to take a gander at the recent hedge fund action regarding CSG Systems International, Inc. (NASDAQ:CSGS).
How have hedgies been trading CSG Systems International, Inc. (NASDAQ:CSGS)?
Heading into the first quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in CSGS 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.
The largest stake in CSG Systems International, Inc. (NASDAQ:CSGS) was held by Renaissance Technologies, which reported holding $117.3 million worth of stock at the end of September. It was followed by Polar Capital with a $35 million position. Other investors bullish on the company included Arrowstreet Capital, GLG Partners, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to CSG Systems International, Inc. (NASDAQ:CSGS), around 0.73% of its 13F portfolio. Polar Capital is also relatively very bullish on the stock, earmarking 0.3 percent of its 13F equity portfolio to CSGS.
As one would reasonably expect, some big names were breaking ground themselves. GLG Partners, managed by Noam Gottesman, established the most outsized position in CSG Systems International, Inc. (NASDAQ:CSGS). GLG Partners had $13.8 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $1.5 million investment in the stock during the quarter. The following funds were also among the new CSGS investors: Brandon Haley’s Holocene Advisors, Benjamin A. Smith’s Laurion Capital Management, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s go over hedge fund activity in other stocks similar to CSG Systems International, Inc. (NASDAQ:CSGS). These stocks are Cardiovascular Systems Inc (NASDAQ:CSII), Kulicke and Soffa Industries Inc. (NASDAQ:KLIC), Eventbrite, Inc. (NYSE:EB), and InterDigital, Inc. (NASDAQ:IDCC). This group of stocks’ market valuations resemble CSGS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CSII | 16 | 135257 | -1 |
| KLIC | 22 | 340478 | 2 |
| EB | 24 | 321993 | 1 |
| IDCC | 27 | 300116 | 0 |
| Average | 22.25 | 274461 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $274 million. That figure was $238 million in CSGS’s case. InterDigital, Inc. (NASDAQ:IDCC) is the most popular stock in this table. On the other hand Cardiovascular Systems Inc (NASDAQ:CSII) is the least popular one with only 16 bullish hedge fund positions. CSG Systems International, Inc. (NASDAQ:CSGS) 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 13.0% in 2020 through April 6th but still beat the market by 4.2 percentage points. Hedge funds were also right about betting on CSGS, though not to the same extent, as the stock returned -13.4% during the first three months of 2020 (through April 6th) and outperformed the market as well.
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.
