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 (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. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. 0
Is C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) undervalued? The best stock pickers are becoming less confident. The number of long hedge fund bets fell by 2 in recent months. Our calculations also showed that CHRW isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 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.
Ken Griffin of Citadel Investment Group
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. Keeping this in mind let’s analyze the new hedge fund action surrounding C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW).
What does smart money think about C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW)?
Heading into the first quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CHRW over the last 18 quarters. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), with a stake worth $110.3 million reported as of the end of September. Trailing Citadel Investment Group was AQR Capital Management, which amassed a stake valued at $80.6 million. Millennium Management, Two Sigma Advisors, 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 Centenus Global Management allocated the biggest weight to C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), around 0.91% of its 13F portfolio. Pinz Capital is also relatively very bullish on the stock, setting aside 0.89 percent of its 13F equity portfolio to CHRW.
Due to the fact that C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) has faced falling interest from the smart money, we can see that there were a few money managers who sold off their entire stakes by the end of the third quarter. Intriguingly, Renaissance Technologies cut the biggest investment of all the hedgies tracked by Insider Monkey, worth an estimated $10.8 million in stock, and Matthew Tewksbury’s Stevens Capital Management was right behind this move, as the fund sold off about $1 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 2 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks similar to C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW). These stocks are Insulet Corporation (NASDAQ:PODD), Regency Centers Corp (NYSE:REG), PulteGroup, Inc. (NYSE:PHM), and Bausch Health Companies (NYSE:BHC). This group of stocks’ market caps match CHRW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PODD | 34 | 731520 | -4 |
| REG | 16 | 139028 | -1 |
| PHM | 34 | 733761 | 3 |
| BHC | 31 | 2822011 | -2 |
| Average | 28.75 | 1106580 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $1107 million. That figure was $415 million in CHRW’s case. Insulet Corporation (NASDAQ:PODD) is the most popular stock in this table. On the other hand Regency Centers Corp (NYSE:REG) is the least popular one with only 16 bullish hedge fund positions. C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) is not the least popular stock in this group but hedge fund interest is still below 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. A small number of hedge funds were also right about betting on CHRW as the stock returned -21.4% during the same time period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
