Here is What Hedge Funds Think About Cosan Limited (USA) (CZZ)

Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The time period between June 25 and the end of October was one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Cosan Limited (USA) (NYSE:CZZ).

Cosan Limited (USA) (NYSE:CZZ) investors should pay attention to a slight decrease in activity from the world’s largest hedge funds recently. CZZ was in 15 hedge funds’ portfolios at the end of the third quarter of 2015. There were 17 hedge funds in our database with CZZ positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as ACCO Brands Corporation (NYSE:ACCO), First Bancorp (NYSE:FBP), and Navigant Consulting, Inc. (NYSE:NCI) to gather more data points.

If you’d ask most shareholders, hedge funds are seen as underperforming, old investment vehicles of yesteryear. While there are over 8000 funds with their doors open today, Our researchers look at the elite of this group, approximately 700 funds. These hedge fund managers manage most of all hedge funds’ total capital, and by observing their highest performing equity investments, Insider Monkey has unearthed many investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Keeping this in mind, we’re going to analyze the fresh action regarding Cosan Limited (USA) (NYSE:CZZ).

Hedge fund activity in Cosan Limited (USA) (NYSE:CZZ)

At the Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from the previous quarter. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Carlson Capital, managed by Clint Carlson, holds the most valuable position in Cosan Limited (USA) (NYSE:CZZ). Carlson Capital has a $42.5 million position in the stock, comprising 0.5% of its 13F portfolio. The second most bullish fund manager is David Kowitz and Sheldon Kasowitz’s Indus Capital, with a $9.9 million position; 1.3% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions include Jos Shaver’s Electron Capital Partners, Martin Whitman’s Third Avenue Management and D. E. Shaw’s D E Shaw.

Judging by the fact that Cosan Limited (USA) (NYSE:CZZ) has faced bearish sentiment from hedge fund managers, we can see that there exists a select few funds that slashed their full holdings by the end of the third quarter. Intriguingly, Phill Gross and Robert Atchinson’s Adage Capital Management cut the largest stake of the 700 funds followed by Insider Monkey, totaling an estimated $4.3 million in stock. Philip Hempleman’s fund, Ardsley Partners, also cut its stock, about $0.9 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 2 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Cosan Limited (USA) (NYSE:CZZ) but similarly valued. We will take a look at ACCO Brands Corporation (NYSE:ACCO), First Bancorp (NYSE:FBP), Navigant Consulting, Inc. (NYSE:NCI), and Resolute Forest Products Inc (NYSE:RFP). This group of stocks’ market values are similar to CZZ’s market value.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $167 million, higher than the $67 million in CZZ’s case. Resolute Forest Products Inc (NYSE:RFP) is the most popular stock in this table, while ACCO Brands Corporation (NYSE:ACCO) is the least popular one with only 11 bullish hedge fund positions. Cosan Limited (USA) (NYSE:CZZ) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard RFP might be a better candidate to consider a long position.