Is CDW Corporation (CDW) A Good Stock To Buy?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards CDW Corporation (NASDAQ:CDW) changed recently.

Is CDW Corporation (NASDAQ:CDW) a safe investment now? Money managers were in an optimistic mood. The number of long hedge fund bets moved up by 10 lately. CDW Corporation (NASDAQ:CDW) was in 37 hedge funds’ portfolios at the end of September. The all time high for this statistic is 43. Our calculations also showed that CDW isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to review the new hedge fund action regarding CDW Corporation (NASDAQ:CDW).

Thomas Bancroft of Makaira Partners

Do Hedge Funds Think CDW Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 37% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CDW over the last 25 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Select Equity Group held the most valuable stake in CDW Corporation (NASDAQ:CDW), which was worth $1244.7 million at the end of the third quarter. On the second spot was Gobi Capital which amassed $253.2 million worth of shares. AQR Capital Management, Balyasny Asset Management, and Makaira Partners 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 LFL Advisers allocated the biggest weight to CDW Corporation (NASDAQ:CDW), around 22.81% of its 13F portfolio. Makaira Partners is also relatively very bullish on the stock, designating 11.12 percent of its 13F equity portfolio to CDW.

Now, key money managers have jumped into CDW Corporation (NASDAQ:CDW) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the most outsized position in CDW Corporation (NASDAQ:CDW). Balyasny Asset Management had $61 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $4.4 million position during the quarter. The other funds with brand new CDW positions are Jinghua Yan’s TwinBeech Capital, Renaissance Technologies, and Qing Li’s Sciencast Management.

Let’s check out hedge fund activity in other stocks similar to CDW Corporation (NASDAQ:CDW). We will take a look at Avantor, Inc. (NYSE:AVTR), Ryanair Holdings plc (NASDAQ:RYAAY), Franco-Nevada Corporation (NYSE:FNV), AmerisourceBergen Corporation (NYSE:ABC), Cheniere Energy, Inc. (NYSE:LNG), Horizon Therapeutics Public Limited Company (NASDAQ:HZNP), and Expedia Group Inc (NASDAQ:EXPE). This group of stocks’ market caps match CDW’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 46.4 hedge funds with bullish positions and the average amount invested in these stocks was $2738 million. That figure was $1906 million in CDW’s case. Expedia Group Inc (NASDAQ:EXPE) is the most popular stock in this table. On the other hand Ryanair Holdings plc (NASDAQ:RYAAY) is the least popular one with only 15 bullish hedge fund positions. CDW Corporation (NASDAQ:CDW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CDW is 53.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and surpassed the market again by 5.6 percentage points. Unfortunately CDW wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CDW investors were disappointed as the stock returned 4.3% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.