Looking for high-potential stocks? 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 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period 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 Cavco Industries, Inc. (NASDAQ:CVCO).
Cavco Industries, Inc. (NASDAQ:CVCO) investors should be aware of a decrease in support from the world’s most successful money managers recently. CVCO was in 13 hedge funds’ portfolios at the end of September. There were 16 hedge funds in our database with CVCO positions at the end of the previous quarter. At the end of this article we will also compare CVCO to other stocks including Eros International plc (NYSE:EROS), Noble Midstream Partners LP (NYSE:NBLX), and Heartland Financial USA Inc (NASDAQ:HTLF) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Keeping this in mind, we’re going to take a peek at the latest action regarding Cavco Industries, Inc. (NASDAQ:CVCO).
What does the smart money think about Cavco Industries, Inc. (NASDAQ:CVCO)?
Heading into the fourth quarter of 2016, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 19% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CVCO over the last 5 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Martin Whitman’s Third Avenue Management has the most valuable position in Cavco Industries, Inc. (NASDAQ:CVCO), worth close to $46.8 million, comprising 2.1% of its total 13F portfolio. The second most bullish fund manager is Mario Gabelli of GAMCO Investors which holds a $38.6 million position. Remaining professional money managers that hold long positions contain Renaissance Technologies which is one of the largest hedge funds in the world, Ken Grossman and Glen Schneider’s SG Capital Management and Chuck Royce’s Royce & Associates. We should note that SG Capital Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Judging by the fact that Cavco Industries, Inc. (NASDAQ:CVCO) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there were a few money managers that decided to sell off their entire stakes in the third quarter. Interestingly, Paul Tudor Jones’ Tudor Investment Corp said goodbye to the biggest position of all the hedgies monitored by Insider Monkey, worth an estimated $0.3 million in stock. Matthew Tewksbury’s fund, Stevens Capital Management, also said goodbye to its stock, about $0.3 million worth of shares.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Cavco Industries, Inc. (NASDAQ:CVCO) but similarly valued. These stocks are Eros International plc (NYSE:EROS), Noble Midstream Partners LP (NYSE:NBLX), Heartland Financial USA Inc (NASDAQ:HTLF), and Universal Insurance Holdings, Inc. (NYSEAMEX:UVE). All of these stocks’ market caps resemble CVCO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EROS | 8 | 40946 | 1 |
| NBLX | 4 | 26092 | 4 |
| HTLF | 8 | 13628 | -3 |
| UVE | 15 | 41533 | -4 |
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $166 million in CVCO’s case. Universal Insurance Holdings, Inc. (NYSEAMEX:UVE) is the most popular stock in this table. On the other hand Noble Midstream Partners LP (NYSE:NBLX) is the least popular one with only 4 bullish hedge fund positions. Cavco Industries, Inc. (NASDAQ:CVCO) 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. In this regard UVE might be a better candidate to consider taking a long position in.
Disclosure: None
