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 (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 835 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider CBRE Group, Inc. (NYSE:CBRE) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Is CBRE Group, Inc. (NYSE:CBRE) a buy, sell, or hold? The best stock pickers are becoming less confident. The number of long hedge fund bets dropped by 1 recently. Our calculations also showed that CBRE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
According to most market participants, hedge funds are assumed to be underperforming, outdated financial tools of the past. While there are over 8000 funds in operation at present, We look at the masters of this group, approximately 850 funds. These money managers have their hands on most of the smart money’s total asset base, and by following their best picks, Insider Monkey has spotted many investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum 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 .
David Blood of Generation Investment 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. Now let’s view the new hedge fund action encompassing CBRE Group, Inc. (NYSE:CBRE).
What have hedge funds been doing with CBRE Group, Inc. (NYSE:CBRE)?
Heading into the first quarter of 2020, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from the third quarter of 2019. By comparison, 34 hedge funds held shares or bullish call options in CBRE a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, ValueAct Capital held the most valuable stake in CBRE Group, Inc. (NYSE:CBRE), which was worth $626.7 million at the end of the third quarter. On the second spot was Cantillon Capital Management which amassed $413.9 million worth of shares. Hosking Partners, Ariel Investments, and GLG Partners 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 ValueAct Capital allocated the biggest weight to CBRE Group, Inc. (NYSE:CBRE), around 6.34% of its 13F portfolio. Cantillon Capital Management is also relatively very bullish on the stock, dishing out 3.85 percent of its 13F equity portfolio to CBRE.
Judging by the fact that CBRE Group, Inc. (NYSE:CBRE) has witnessed a decline in interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of fund managers who sold off their positions entirely last quarter. Intriguingly, Josh Donfeld and David Rogers’s Castle Hook Partners dropped the biggest investment of the 750 funds watched by Insider Monkey, worth close to $9.8 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund dropped about $8 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 1 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as CBRE Group, Inc. (NYSE:CBRE) but similarly valued. We will take a look at Hewlett Packard Enterprise Company (NYSE:HPE), Hess Corporation (NYSE:HES), Pembina Pipeline Corp (NYSE:PBA), and CGI Inc. (NYSE:GIB). All of these stocks’ market caps match CBRE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HPE | 41 | 1048549 | 10 |
| HES | 34 | 536867 | -4 |
| PBA | 17 | 48892 | 5 |
| GIB | 19 | 351250 | 3 |
| Average | 27.75 | 496390 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $496 million. That figure was $1499 million in CBRE’s case. Hewlett Packard Enterprise Company (NYSE:HPE) is the most popular stock in this table. On the other hand Pembina Pipeline Corp (NYSE:PBA) is the least popular one with only 17 bullish hedge fund positions. CBRE Group, Inc. (NYSE:CBRE) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 beat the market by 3.2 percentage points. Unfortunately CBRE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CBRE were disappointed as the stock returned -37.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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.
