Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 13.1% in the 2.5 months of 2019 (including dividend payments). Conversely, hedge funds’ 15 preferred S&P 500 stocks generated a return of 19.7% during the same period, with 93% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Central Garden & Pet Co (NASDAQ:CENT).
Central Garden & Pet Co (NASDAQ:CENT) shareholders have witnessed an increase in hedge fund interest in recent months. CENT was in 24 hedge funds’ portfolios at the end of December. There were 20 hedge funds in our database with CENT positions at the end of the previous quarter. Our calculations also showed that CENT isn’t among the 30 most popular stocks among hedge funds.
According to most market participants, hedge funds are viewed as underperforming, outdated financial tools of yesteryear. While there are over 8000 funds with their doors open today, Our experts look at the masters of this group, about 750 funds. These investment experts administer most of all hedge funds’ total asset base, and by following their highest performing stock picks, Insider Monkey has discovered several investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by nearly 5 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
We’re going to view the fresh hedge fund action encompassing Central Garden & Pet Co (NASDAQ:CENT).
Hedge fund activity in Central Garden & Pet Co (NASDAQ:CENT)
At Q4’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CENT over the last 14 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Central Garden & Pet Co (NASDAQ:CENT) was held by Renaissance Technologies, which reported holding $33.8 million worth of stock at the end of September. It was followed by CQS Cayman LP with a $20.4 million position. Other investors bullish on the company included Echo Street Capital Management, D E Shaw, and Portolan Capital Management.
Consequently, some big names were breaking ground themselves. Highbridge Capital Management, managed by Glenn Russell Dubin, created the biggest position in Central Garden & Pet Co (NASDAQ:CENT). Highbridge Capital Management had $4.7 million invested in the company at the end of the quarter. George McCabe’s Portolan Capital Management also made a $4.7 million investment in the stock during the quarter. The other funds with brand new CENT positions are Minhua Zhang’s Weld Capital Management, Mike Vranos’s Ellington, and Brandon Haley’s Holocene Advisors.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Central Garden & Pet Co (NASDAQ:CENT) but similarly valued. We will take a look at BioTelemetry, Inc. (NASDAQ:BEAT), Crestwood Equity Partners LP (NYSE:CEQP), Cirrus Logic, Inc. (NASDAQ:CRUS), and Designer Brands Inc. (NYSE:DSW). This group of stocks’ market valuations match CENT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BEAT | 24 | 75826 | 8 |
| CEQP | 3 | 25732 | -1 |
| CRUS | 20 | 174774 | -1 |
| DSW | 27 | 185944 | 0 |
| Average | 18.5 | 115569 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $116 million. That figure was $148 million in CENT’s case. Designer Brands Inc. (NYSE:DSW) is the most popular stock in this table. On the other hand Crestwood Equity Partners LP (NYSE:CEQP) is the least popular one with only 3 bullish hedge fund positions. Central Garden & Pet Co (NASDAQ:CENT) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately CENT wasn’t nearly as popular as these 15 stock and hedge funds that were betting on CENT were disappointed as the stock returned -25.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
