Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in CDW Corporation (NASDAQ:CDW)? The smart money sentiment can provide an answer to this question.
Is CDW Corporation (NASDAQ:CDW) the right pick for your portfolio? The smart money is getting more bullish. The number of long hedge fund positions went up by 2 lately. Our calculations also showed that CDW isn’t among the 30 most popular stocks among hedge funds. CDW was in 28 hedge funds’ portfolios at the end of March. There were 26 hedge funds in our database with CDW holdings at the end of the previous quarter.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
We’re going to take a glance at the key hedge fund action encompassing CDW Corporation (NASDAQ:CDW).
Hedge fund activity in CDW Corporation (NASDAQ:CDW)
At Q1’s end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. On the other hand, there were a total of 23 hedge funds with a bullish position in CDW 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.
Among these funds, Select Equity Group held the most valuable stake in CDW Corporation (NASDAQ:CDW), which was worth $431.6 million at the end of the first quarter. On the second spot was AQR Capital Management which amassed $328.2 million worth of shares. Moreover, Makaira Partners, GLG Partners, and GMT Capital were also bullish on CDW Corporation (NASDAQ:CDW), allocating a large percentage of their portfolios to this stock.
With a general bullishness amongst the heavyweights, some big names have jumped into CDW Corporation (NASDAQ:CDW) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the largest position in CDW Corporation (NASDAQ:CDW). Marshall Wace LLP had $2.4 million invested in the company at the end of the quarter. Roy Vermus and Shlomi Bracha’s Noked Capital also made a $0.4 million investment in the stock during the quarter. The other funds with brand new CDW positions are Ian Simm’s Impax Asset Management and Paul Tudor Jones’s Tudor Investment Corp.
Let’s now take a look at hedge fund activity in other stocks similar to CDW Corporation (NASDAQ:CDW). These stocks are Hologic, Inc. (NASDAQ:HOLX), Franco-Nevada Corporation (NYSE:FNV), Cincinnati Financial Corporation (NASDAQ:CINF), and Host Hotels and Resorts Inc (NYSE:HST). This group of stocks’ market caps are similar to CDW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HOLX | 23 | 755952 | -5 |
| FNV | 19 | 457607 | -4 |
| CINF | 21 | 545563 | -1 |
| HST | 27 | 576569 | 5 |
| Average | 22.5 | 583923 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $584 million. That figure was $1148 million in CDW’s case. Host Hotels and Resorts Inc (NYSE:HST) is the most popular stock in this table. On the other hand Franco-Nevada Corporation (NYSE:FNV) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks CDW Corporation (NASDAQ:CDW) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on CDW as the stock returned 6.7% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
