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 CarGurus, Inc. (NASDAQ:CARG).
CarGurus, Inc. (NASDAQ:CARG) was in 21 hedge funds’ portfolios at the end of the third quarter of 2019. CARG shareholders have witnessed an increase in hedge fund sentiment lately. There were 20 hedge funds in our database with CARG holdings at the end of the previous quarter. Our calculations also showed that CARG 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.
To most market participants, hedge funds are perceived as slow, outdated investment vehicles of years past. While there are greater than 8000 funds trading today, Our experts hone in on the masters of this group, around 750 funds. These investment experts watch over most of the smart money’s total asset base, and by shadowing their finest picks, Insider Monkey has uncovered many investment strategies that have historically outrun the broader indices. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Matthew Hulsizer of PEAK6 Capital
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now let’s take a look at the new hedge fund action regarding CarGurus, Inc. (NASDAQ:CARG).
How are hedge funds trading CarGurus, Inc. (NASDAQ:CARG)?
Heading into the fourth quarter of 2019, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CARG 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.
According to Insider Monkey’s hedge fund database, Alexander Captain’s Cat Rock Capital has the number one position in CarGurus, Inc. (NASDAQ:CARG), worth close to $187 million, comprising 29.4% of its total 13F portfolio. The second most bullish fund manager is Hound Partners, led by Jonathan Auerbach, holding a $179.5 million position; the fund has 11.4% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish include David Goel and Paul Ferri’s Matrix Capital Management, Mick Hellman’s HMI Capital and James Woodson Davis’s Woodson Capital Management. In terms of the portfolio weights assigned to each position Cat Rock Capital allocated the biggest weight to CarGurus, Inc. (NASDAQ:CARG), around 29.45% of its 13F portfolio. HMI Capital is also relatively very bullish on the stock, dishing out 16.54 percent of its 13F equity portfolio to CARG.
As aggregate interest increased, key money managers have been driving this bullishness. General Equity Partners, managed by Andrew Bellas, created the most valuable position in CarGurus, Inc. (NASDAQ:CARG). General Equity Partners had $11.9 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $1 million position during the quarter. The other funds with brand new CARG positions are Matthew Hulsizer’s PEAK6 Capital Management and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s check out hedge fund activity in other stocks similar to CarGurus, Inc. (NASDAQ:CARG). These stocks are White Mountains Insurance Group Ltd (NYSE:WTM), Colfax Corporation (NYSE:CFX), Macquarie Infrastructure Corporation (NYSE:MIC), and The Descartes Systems Group Inc (NASDAQ:DSGX). All of these stocks’ market caps are similar to CARG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WTM | 16 | 185765 | -1 |
| CFX | 30 | 652861 | 3 |
| MIC | 26 | 231644 | -2 |
| DSGX | 14 | 126013 | 3 |
| Average | 21.5 | 299071 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $299 million. That figure was $813 million in CARG’s case. Colfax Corporation (NYSE:CFX) is the most popular stock in this table. On the other hand Descartes Systems Group (NASDAQ:DSGX) is the least popular one with only 14 bullish hedge fund positions. CarGurus, Inc. (NASDAQ:CARG) 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 CARG as the stock returned 29.5% 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.
