Is Compass Diversified Holdings LLC (NYSE:CODI) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Compass Diversified Holdings LLC (NYSE:CODI) investors should pay attention to an increase in hedge fund interest of late. Our calculations also showed that CODI isn’t among the 30 most popular stocks among hedge funds (see the video below).
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to analyze the fresh hedge fund action regarding Compass Diversified Holdings LLC (NYSE:CODI).
How are hedge funds trading Compass Diversified Holdings LLC (NYSE:CODI)?
At the end of the second quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the first quarter of 2019. By comparison, 5 hedge funds held shares or bullish call options in CODI a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Compass Diversified Holdings LLC (NYSE:CODI), with a stake worth $3.5 million reported as of the end of March. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $2.5 million. McKinley Capital Management, PEAK6 Capital Management, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, key money managers have jumped into Compass Diversified Holdings LLC (NYSE:CODI) headfirst. Renaissance Technologies initiated the biggest position in Compass Diversified Holdings LLC (NYSE:CODI). Renaissance Technologies had $3.5 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $0.6 million position during the quarter. The only other fund with a brand new CODI position is John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s go over hedge fund activity in other stocks similar to Compass Diversified Holdings LLC (NYSE:CODI). We will take a look at GasLog Ltd (NYSE:GLOG), Triumph Group Inc (NYSE:TGI), Qutoutiao Inc. (NASDAQ:QTT), and Guess’, Inc. (NYSE:GES). This group of stocks’ market valuations are similar to CODI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GLOG | 13 | 47609 | 2 |
| TGI | 12 | 62143 | 0 |
| QTT | 7 | 32603 | 2 |
| GES | 15 | 85146 | -3 |
| Average | 11.75 | 56875 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $8 million in CODI’s case. Guess’, Inc. (NYSE:GES) is the most popular stock in this table. On the other hand Qutoutiao Inc. (NASDAQ:QTT) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Compass Diversified Holdings LLC (NYSE:CODI) is even less popular than QTT. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on CODI, though not to the same extent, as the stock returned 5% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
