“October lived up to its scary reputation—the S&P 500 falling in the month by the largest amount in the last 40 years, the only worse Octobers being ’08 and the Crash of ’87. For perspective, there have been only 5 occasions in those 40 years when the S&P 500 declined by greater than 20% from peak to trough. Other than the ’87 Crash, all were during recessions. There were 17 other instances, over the same time frame, when the market fell by over 10% but less than 20%. Furthermore, this is the 18th correction of 5% or more since the current bull market started in March ’09. Corrections are the norm. They can be healthy as they often undo market complacency—overbought levels—potentially allowing the market to base and move even higher.” This is how Trapeze Asset Management summarized the recent market moves in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.
Is Corelogic Inc (NYSE:CLGX) going to take off soon? Prominent investors are in a bullish mood. The number of long hedge fund positions moved up by 4 in recent months. Our calculations also showed that CLGX isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 18 percentage points since May 2014 through December 3, 2018 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to take a gander at the fresh hedge fund action encompassing Corelogic Inc (NYSE:CLGX).
Hedge fund activity in Corelogic Inc (NYSE:CLGX)
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CLGX over the last 13 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Corelogic Inc (NYSE:CLGX) was held by D E Shaw, which reported holding $147.1 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $103.9 million position. Other investors bullish on the company included AQR Capital Management, Sunriver Management, and Renaissance Technologies.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into Corelogic Inc (NYSE:CLGX) headfirst. Echo Street Capital Management, managed by Greg Poole, established the most outsized position in Corelogic Inc (NYSE:CLGX). Echo Street Capital Management had $9.4 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also initiated a $1.9 million position during the quarter. The following funds were also among the new CLGX investors: Dmitry Balyasny’s Balyasny Asset Management, Andre F. Perold’s HighVista Strategies, and Brandon Haley’s Holocene Advisors.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Corelogic Inc (NYSE:CLGX) but similarly valued. These stocks are First Financial Bankshares Inc (NASDAQ:FFIN), Axon Enterprise, Inc. (NASDAQ:AAXN), Kirkland Lake Gold Ltd. (NYSE:KL), and Spectrum Brands Holdings, Inc. (NYSE:SPB). This group of stocks’ market values are similar to CLGX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FFIN | 6 | 10038 | 0 |
| AAXN | 16 | 439775 | -12 |
| KL | 20 | 170961 | 5 |
| SPB | 26 | 915142 | 4 |
| Average | 17 | 383979 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $384 million. That figure was $378 million in CLGX’s case. Spectrum Brands Holdings, Inc. (NYSE:SPB) is the most popular stock in this table. On the other hand First Financial Bankshares Inc (NASDAQ:FFIN) is the least popular one with only 6 bullish hedge fund positions. Corelogic Inc (NYSE:CLGX) 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 SPB might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
