We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. What do these smart investors think about Charles River Laboratories International Inc. (NYSE:CRL)?
Charles River Laboratories International Inc. (NYSE:CRL) investors should be aware of a decrease in support from the world’s most elite money managers of late. Our calculations also showed that CRL isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 S&P 500 ETFs by 41 percentage points since March 2017 (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.
Harold Levy of Iridian Asset Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to view the key hedge fund action regarding Charles River Laboratories International Inc. (NYSE:CRL).
What does smart money think about Charles River Laboratories International Inc. (NYSE:CRL)?
At Q4’s end, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CRL over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Among these funds, AQR Capital Management held the most valuable stake in Charles River Laboratories International Inc. (NYSE:CRL), which was worth $255.4 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $218.1 million worth of shares. Ariel Investments, Millennium Management, and OZ Management 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 Kerrisdale Capital allocated the biggest weight to Charles River Laboratories International Inc. (NYSE:CRL), around 7.48% of its 13F portfolio. MD Sass is also relatively very bullish on the stock, designating 2.77 percent of its 13F equity portfolio to CRL.
Seeing as Charles River Laboratories International Inc. (NYSE:CRL) 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 hedgies that elected to cut their full holdings in the third quarter. Intriguingly, Vishal Saluja and Pham Quang’s Endurant Capital Management dumped the biggest investment of the “upper crust” of funds followed by Insider Monkey, comprising close to $9.9 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dropped about $3.1 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 1 funds in the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Charles River Laboratories International Inc. (NYSE:CRL) but similarly valued. These stocks are LPL Financial Holdings Inc (NASDAQ:LPLA), Tapestry, Inc. (NYSE:TPR), Dropbox, Inc. (NASDAQ:DBX), and Algonquin Power & Utilities Corp. (NYSE:AQN). All of these stocks’ market caps are closest to CRL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LPLA | 41 | 1380551 | 4 |
| TPR | 40 | 543774 | 14 |
| DBX | 46 | 839623 | 4 |
| AQN | 13 | 248252 | -3 |
| Average | 35 | 753050 | 4.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $753 million. That figure was $1089 million in CRL’s case. Dropbox, Inc. (NASDAQ:DBX) is the most popular stock in this table. On the other hand Algonquin Power & Utilities Corp. (NYSE:AQN) is the least popular one with only 13 bullish hedge fund positions. Charles River Laboratories International Inc. (NYSE:CRL) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately CRL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CRL investors were disappointed as the stock returned -31.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
