We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Calavo Growers, Inc. (NASDAQ:CVGW).
Calavo Growers, Inc. (NASDAQ:CVGW) investors should be aware of an increase in hedge fund sentiment in recent months. Our calculations also showed that CVGW isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Paul Marshall of Marshall Wace
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s check out the fresh hedge fund action surrounding Calavo Growers, Inc. (NASDAQ:CVGW).
How have hedgies been trading Calavo Growers, Inc. (NASDAQ:CVGW)?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in CVGW a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies holds the most valuable position in Calavo Growers, Inc. (NASDAQ:CVGW). Renaissance Technologies has a $30.4 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Cardinal Capital, managed by Amy Minella, which holds a $26.6 million position; 0.9% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism contain Paul Marshall and Ian Wace’s Marshall Wace, Ken Griffin’s Citadel Investment Group and Noam Gottesman’s GLG Partners. In terms of the portfolio weights assigned to each position Harvest Capital Strategies allocated the biggest weight to Calavo Growers, Inc. (NASDAQ:CVGW), around 1.94% of its 13F portfolio. Cardinal Capital is also relatively very bullish on the stock, setting aside 0.88 percent of its 13F equity portfolio to CVGW.
Consequently, specific money managers have jumped into Calavo Growers, Inc. (NASDAQ:CVGW) headfirst. Marshall Wace, managed by Paul Marshall and Ian Wace, assembled the largest position in Calavo Growers, Inc. (NASDAQ:CVGW). Marshall Wace had $11.8 million invested in the company at the end of the quarter. David E. Shaw’s D E Shaw also initiated a $5.2 million position during the quarter. The following funds were also among the new CVGW investors: Mike Vranos’s Ellington, Matthew Hulsizer’s PEAK6 Capital Management, and Benjamin A. Smith’s Laurion Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Calavo Growers, Inc. (NASDAQ:CVGW) but similarly valued. These stocks are SailPoint Technologies Holdings, Inc. (NYSE:SAIL), Banco Macro SA (NYSE:BMA), Meredith Corporation (NYSE:MDP), and Kaman Corporation (NYSE:KAMN). All of these stocks’ market caps resemble CVGW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SAIL | 23 | 226214 | 1 |
| BMA | 11 | 95493 | 1 |
| MDP | 19 | 274737 | 8 |
| KAMN | 19 | 248406 | 5 |
| Average | 18 | 211213 | 3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $211 million. That figure was $108 million in CVGW’s case. SailPoint Technologies Holdings, Inc. (NYSE:SAIL) is the most popular stock in this table. On the other hand Banco Macro SA (NYSE:BMA) is the least popular one with only 11 bullish hedge fund positions. Calavo Growers, Inc. (NASDAQ:CVGW) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CVGW wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CVGW investors were disappointed as the stock returned -5.1% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
