Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Cooper-Standard Holdings Inc (NYSE:CPS) was in 17 hedge funds’ portfolios at the end of December. CPS investors should pay attention to a decrease in hedge fund sentiment recently. There were 25 hedge funds in our database with CPS holdings at the end of the previous quarter. Our calculations also showed that cps isn’t among the 30 most popular stocks among hedge funds.
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 market by 32 percentage points since May 2014 through March 12, 2019 (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.
We’re going to check out the latest hedge fund action encompassing Cooper-Standard Holdings Inc (NYSE:CPS).
How are hedge funds trading Cooper-Standard Holdings Inc (NYSE:CPS)?
Heading into the first quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -32% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CPS over the last 14 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.
The largest stake in Cooper-Standard Holdings Inc (NYSE:CPS) was held by Royce & Associates, which reported holding $12.5 million worth of stock at the end of December. It was followed by D E Shaw with a $6.8 million position. Other investors bullish on the company included Levin Capital Strategies, Two Sigma Advisors, and Citadel Investment Group.
Judging by the fact that Cooper-Standard Holdings Inc (NYSE:CPS) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there is a sect of fund managers that elected to cut their entire stakes in the third quarter. At the top of the heap, Edward A. Mule’s Silver Point Capital cut the biggest stake of all the hedgies watched by Insider Monkey, valued at close to $46.2 million in stock, and Thomas Ellis and Todd Hammer’s North Run Capital was right behind this move, as the fund dumped about $6.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 8 funds in the third quarter.
Let’s now review hedge fund activity in other stocks similar to Cooper-Standard Holdings Inc (NYSE:CPS). These stocks are PRA Group, Inc. (NASDAQ:PRAA), Heritage Financial Corporation (NASDAQ:HFWA), Houghton Mifflin Harcourt Co (NASDAQ:HMHC), and Evoqua Water Technologies Corp. (NYSE:AQUA). This group of stocks’ market valuations resemble CPS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PRAA | 10 | 87363 | 3 |
| HFWA | 8 | 57644 | 2 |
| HMHC | 19 | 283998 | 6 |
| AQUA | 12 | 82604 | 1 |
| Average | 12.25 | 127902 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $128 million. That figure was $43 million in CPS’s case. Houghton Mifflin Harcourt Co (NASDAQ:HMHC) is the most popular stock in this table. On the other hand Heritage Financial Corporation (NASDAQ:HFWA) is the least popular one with only 8 bullish hedge fund positions. Cooper-Standard Holdings Inc (NYSE:CPS) 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. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately CPS wasn’t nearly as popular as these 15 stock and hedge funds that were betting on CPS were disappointed as the stock returned -10.8% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
