Many investors, including Carl Icahn or Stan Druckenmiller, have been saying for a while now that Trump presidency will be good for publicly traded stocks (at least in the very short term) due to lower taxes and higher GDP growth rates. Both investors profited handsomely from this analysis during the 5 hours immediately following Donald Trump’s election victory. The markets, especially small-cap stocks, kept rallying in the following three weeks. Nevertheless, there are still opportunities in individual stocks and we believe the stocks with strong hedge fund bullish stance are a good place to look for investment ideas. In this article we will find out how hedge fund sentiment to CDK Global Inc (NASDAQ:CDK) changed recently.
Is CDK Global Inc (NASDAQ:CDK) going to take off soon? Investors who are in the know are surely becoming less confident. The number of long hedge fund bets were cut by 3 lately. CDK was in 42 hedge funds’ portfolios at the end of the third quarter of 2016. There were 45 hedge funds in our database with CDK positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Mosaic Co (NYSE:MOS), Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH), and Amdocs Limited (NYSE:DOX) to gather more data points.
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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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Now, we’re going to go over the latest action encompassing CDK Global Inc (NASDAQ:CDK).
How have hedgies been trading CDK Global Inc (NASDAQ:CDK)?
At Q3’s end, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, down by 7% from the previous quarter. By comparison, 34 hedge funds held shares or bullish call options in CDK heading into this year. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Paul Singer’s Elliott Management has the most valuable position in CDK Global Inc (NASDAQ:CDK), worth close to $465.2 million, comprising 3.8% of its total 13F portfolio. The second most bullish fund manager is William B. Gray of Orbis Investment Management, with a $354.6 million position; the fund has 2.5% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish encompass John Griffin’s Blue Ridge Capital, Jeffrey Tannenbaum’s Fir Tree and David Cohen and Harold Levy’s Iridian Asset Management. We should note that Orbis Investment 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.
Since CDK Global Inc (NASDAQ:CDK) has witnessed declining sentiment from the smart money, it’s safe to say that there was a specific group of fund managers that elected to cut their positions entirely in the third quarter. Intriguingly, David Fear’s Thunderbird Partners said goodbye to the largest position of the 700 funds monitored by Insider Monkey, worth close to $28.1 million in stock. Andrew Immerman and Jeremy Schiffman’s fund, Palestra Capital Management, also dropped its stock, about $26.8 million worth.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as CDK Global Inc (NASDAQ:CDK) but similarly valued. These stocks are Mosaic Co (NYSE:MOS), Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH), Amdocs Limited (NYSE:DOX), and Cencosud SA (NYSE:CNCO). This group of stocks’ market valuations resemble CDK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MOS | 24 | 343140 | 5 |
| NCLH | 23 | 189921 | -3 |
| DOX | 24 | 602590 | 4 |
| CNCO | 4 | 4207 | 4 |
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $285 million. That figure was $2.75 billion in CDK’s case. Mosaic Co (NYSE:MOS) is the most popular stock in this table. On the other hand Cencosud SA (NYSE:CNCO) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks CDK Global Inc (NASDAQ:CDK) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None
