Is Credit Acceptance Corp. (CACC) Going to Burn These Hedge Funds?

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Credit Acceptance Corp. (NASDAQ:CACC).

Credit Acceptance Corp. (NASDAQ:CACC) was in 25 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 31. CACC has seen an increase in activity from the world’s largest hedge funds of late. There were 20 hedge funds in our database with CACC positions at the end of the second quarter. Our calculations also showed that CACC 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. With all of this in mind we’re going to take a glance at the key hedge fund action surrounding Credit Acceptance Corp. (NASDAQ:CACC).

William Von Mueffling of Cantillon Capital Management

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

At the end of the third quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in CACC over the last 25 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Gobi Capital held the most valuable stake in Credit Acceptance Corp. (NASDAQ:CACC), which was worth $429.7 million at the end of the third quarter. On the second spot was Cantillon Capital Management which amassed $157.4 million worth of shares. Gobi Capital, D E Shaw, and BloombergSen 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 Billings Capital Management allocated the biggest weight to Credit Acceptance Corp. (NASDAQ:CACC), around 26.63% of its 13F portfolio. Gobi Capital is also relatively very bullish on the stock, designating 11.36 percent of its 13F equity portfolio to CACC.

Now, some big names were leading the bulls’ herd. Gobi Capital, managed by Bo Shan, established the biggest position in Credit Acceptance Corp. (NASDAQ:CACC). Gobi Capital had $76.1 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $4.2 million investment in the stock during the quarter. The other funds with brand new CACC positions are Michael Gelband’s ExodusPoint Capital, Greg Eisner’s Engineers Gate Manager, and Ken Griffin’s Citadel Investment Group.

Let’s now take a look at hedge fund activity in other stocks similar to Credit Acceptance Corp. (NASDAQ:CACC). We will take a look at Jefferies Financial Group Inc. (NYSE:JEF), Alcoa Corporation (NYSE:AA), Mirati Therapeutics, Inc. (NASDAQ:MRTX), West Fraser Timber Co. Ltd. (NYSE:WFG), XPO Logistics Inc (NYSE:XPO), Tempur Sealy International Inc. (NYSE:TPX), and Concentrix Corporation (NASDAQ:CNXC). All of these stocks’ market caps resemble CACC’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.6 hedge funds with bullish positions and the average amount invested in these stocks was $1351 million. That figure was $855 million in CACC’s case. XPO Logistics Inc (NYSE:XPO) is the most popular stock in this table. On the other hand Concentrix Corporation (NASDAQ:CNXC) is the least popular one with only 21 bullish hedge fund positions. Credit Acceptance Corp. (NASDAQ:CACC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CACC is 41.3. 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. 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 31.1% in 2021 through December 9th and still beat the market by 5.1 percentage points. A small number of hedge funds were also right about betting on CACC as the stock returned 11.7% since the end of the third quarter (through 12/9) and outperformed the market by an even larger margin.

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