In this article you are going to find out whether hedge funds think CAI International Inc (NYSE:CAI) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is CAI International Inc (NYSE:CAI) a buy right now? The smart money is getting less optimistic. The number of bullish hedge fund bets decreased by 3 lately. Our calculations also showed that CAI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). CAI was in 8 hedge funds’ portfolios at the end of March. There were 11 hedge funds in our database with CAI holdings at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most shareholders, hedge funds are perceived as slow, outdated investment tools of years past. While there are more than 8000 funds with their doors open at present, Our experts hone in on the leaders of this club, about 850 funds. It is estimated that this group of investors command the majority of the hedge fund industry’s total capital, and by tailing their inimitable investments, Insider Monkey has identified a number of investment strategies that have historically exceeded the broader indices. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to go over the key hedge fund action regarding CAI International Inc (NYSE:CAI).
How have hedgies been trading CAI International Inc (NYSE:CAI)?
At the end of the first quarter, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -27% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CAI over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Peter S. Park’s Park West Asset Management has the most valuable position in CAI International Inc (NYSE:CAI), worth close to $21.4 million, accounting for 1.4% of its total 13F portfolio. The second most bullish fund manager is Andrew Weiss of Weiss Asset Management, with a $21 million position; the fund has 3.3% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish consist of Nathaniel August’s Mangrove Partners, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Weiss Asset Management allocated the biggest weight to CAI International Inc (NYSE:CAI), around 3.34% of its 13F portfolio. Mangrove Partners is also relatively very bullish on the stock, designating 1.94 percent of its 13F equity portfolio to CAI.
Seeing as CAI International Inc (NYSE:CAI) has faced falling interest from the entirety of the hedge funds we track, we can see that there were a few money managers who were dropping their entire stakes by the end of the first quarter. At the top of the heap, Bradley Louis Radoff’s Fondren Management sold off the largest stake of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $6.7 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund cut about $0.8 million worth. These transactions are important to note, as total hedge fund interest was cut by 3 funds by the end of the first quarter.
Let’s go over hedge fund activity in other stocks similar to CAI International Inc (NYSE:CAI). These stocks are Helix Energy Solutions Group Inc. (NYSE:HLX), Bicycle Therapeutics plc (NASDAQ:BCYC), Willdan Group, Inc. (NASDAQ:WLDN), and Landcadia Holdings II, Inc. (NASDAQ:LCAHU). All of these stocks’ market caps are closest to CAI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HLX | 10 | 6961 | -10 |
| BCYC | 6 | 33717 | 1 |
| WLDN | 6 | 8408 | 3 |
| LCAHU | 17 | 108456 | 0 |
| Average | 9.75 | 39386 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $64 million in CAI’s case. Landcadia Holdings II, Inc. (NASDAQ:LCAHU) is the most popular stock in this table. On the other hand Bicycle Therapeutics plc (NASDAQ:BCYC) is the least popular one with only 6 bullish hedge fund positions. CAI International Inc (NYSE:CAI) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th but beat the market by 14.8 percentage points. A small number of hedge funds were also right about betting on CAI, though not to the same extent, as the stock returned 23.4% during the second quarter and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.
