Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds’ top 20 stock picks easily bested the broader market, at 37.4% compared to 27.5%, despite there being a few duds in there like Berkshire Hathaway (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
Is Camping World Holdings, Inc. (NYSE:CWH) worth your attention right now? Money managers are getting more optimistic. The number of bullish hedge fund positions rose by 3 lately. Our calculations also showed that CWH 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.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
David Abrams of Abrams Capital Management
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 take a gander at the latest hedge fund action regarding Camping World Holdings, Inc. (NYSE:CWH).
Hedge fund activity in Camping World Holdings, Inc. (NYSE:CWH)
Heading into the fourth quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in CWH over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Abrams Capital Management was the largest shareholder of Camping World Holdings, Inc. (NYSE:CWH), with a stake worth $48.6 million reported as of the end of September. Trailing Abrams Capital Management was Newtyn Management, which amassed a stake valued at $13.4 million. Millennium Management, Coliseum Capital, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Coliseum Capital allocated the biggest weight to Camping World Holdings, Inc. (NYSE:CWH), around 2.33% of its 13F portfolio. Abrams Capital Management is also relatively very bullish on the stock, dishing out 1.36 percent of its 13F equity portfolio to CWH.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the most outsized position in Camping World Holdings, Inc. (NYSE:CWH). Arrowstreet Capital had $0.7 million invested in the company at the end of the quarter. David E. Shaw’s D E Shaw also initiated a $0.5 million position during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, Donald Sussman’s Paloma Partners, and Noam Gottesman’s GLG Partners.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Camping World Holdings, Inc. (NYSE:CWH) but similarly valued. These stocks are Comtech Telecommunications Corp. (NASDAQ:CMTL), Cass Information Systems, Inc. (NASDAQ:CASS), Horizon Bancorp, Inc. (NASDAQ:HBNC), and MBIA Inc. (NYSE:MBI). This group of stocks’ market caps are closest to CWH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CMTL | 19 | 99512 | 2 |
| CASS | 9 | 17888 | -2 |
| HBNC | 10 | 27758 | -1 |
| MBI | 22 | 177777 | 4 |
| Average | 15 | 80734 | 0.75 |
View table here if you experience formatting issues.
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 $81 million. That figure was $95 million in CWH’s case. MBIA Inc. (NYSE:MBI) is the most popular stock in this table. On the other hand Cass Information Systems, Inc. (NASDAQ:CASS) is the least popular one with only 9 bullish hedge fund positions. Camping World Holdings, Inc. (NYSE:CWH) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on CWH as the stock returned 35.3% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
