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 (10 coronavirus predictions).
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 CACI International Inc (NYSE:CACI) based on that data.
CACI International Inc (NYSE:CACI) shareholders have witnessed a decrease in enthusiasm from smart money lately. Our calculations also showed that CACI 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).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Cliff Asness of AQR Capital 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. With all of this in mind let’s take a peek at the latest hedge fund action surrounding CACI International Inc (NYSE:CACI).
How are hedge funds trading CACI International Inc (NYSE:CACI)?
At Q4’s end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in CACI a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Citadel Investment Group was the largest shareholder of CACI International Inc (NYSE:CACI), with a stake worth $123.9 million reported as of the end of September. Trailing Citadel Investment Group was AQR Capital Management, which amassed a stake valued at $104.5 million. Horizon Asset Management, GLG Partners, and Renaissance Technologies 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 Horizon Asset Management allocated the biggest weight to CACI International Inc (NYSE:CACI), around 2.78% of its 13F portfolio. SG Capital Management is also relatively very bullish on the stock, earmarking 2.6 percent of its 13F equity portfolio to CACI.
Due to the fact that CACI International Inc (NYSE:CACI) has witnessed bearish sentiment from hedge fund managers, we can see that there is a sect of hedgies that slashed their full holdings heading into Q4. Interestingly, Mark Coe’s Intrinsic Edge Capital said goodbye to the biggest investment of all the hedgies monitored by Insider Monkey, comprising close to $16.1 million in stock. Lee Ainslie’s fund, Maverick Capital, also dropped its stock, about $5.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 2 funds heading into Q4.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as CACI International Inc (NYSE:CACI) but similarly valued. These stocks are Tallgrass Energy, LP (NYSE:TGE), Polaris Inc. (NYSE:PII), Ingredion Inc (NYSE:INGR), and EQM Midstream Partners, LP (NYSE:EQM). All of these stocks’ market caps resemble CACI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TGE | 31 | 377431 | 8 |
| PII | 26 | 353558 | -3 |
| INGR | 23 | 304077 | -6 |
| EQM | 11 | 40191 | -1 |
| Average | 22.75 | 268814 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $269 million. That figure was $441 million in CACI’s case. Tallgrass Energy, LP (NYSE:TGE) is the most popular stock in this table. On the other hand EQM Midstream Partners, LP (NYSE:EQM) is the least popular one with only 11 bullish hedge fund positions. CACI International Inc (NYSE:CACI) 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 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. Hedge funds were also right about betting on CACI, though not to the same extent, as the stock returned -24.5% during the first two and a half months of 2020 (through March 16th) 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.
