Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.6% in 2019 (through the end of November) and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Curtiss-Wright Corporation (NYSE:CW) investors should be aware of an increase in hedge fund sentiment in recent months. CW was in 20 hedge funds’ portfolios at the end of September. There were 19 hedge funds in our database with CW positions at the end of the previous quarter. Our calculations also showed that CW isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Mario Gabelli of GAMCO Investors
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to review the recent hedge fund action encompassing Curtiss-Wright Corporation (NYSE:CW).
What does smart money think about Curtiss-Wright Corporation (NYSE:CW)?
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CW over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, AQR Capital Management was the largest shareholder of Curtiss-Wright Corporation (NYSE:CW), with a stake worth $158.6 million reported as of the end of September. Trailing AQR Capital Management was GAMCO Investors, which amassed a stake valued at $65.9 million. GLG Partners, Citadel Investment Group, and D E Shaw 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 GAMCO Investors allocated the biggest weight to Curtiss-Wright Corporation (NYSE:CW), around 0.55% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, designating 0.41 percent of its 13F equity portfolio to CW.
Consequently, key hedge funds have jumped into Curtiss-Wright Corporation (NYSE:CW) headfirst. Fisher Asset Management, managed by Ken Fisher, created the largest position in Curtiss-Wright Corporation (NYSE:CW). Fisher Asset Management had $3.2 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also initiated a $2.2 million position during the quarter. The following funds were also among the new CW investors: Lee Ainslie’s Maverick Capital, Donald Sussman’s Paloma Partners, and Matthew Tewksbury’s Stevens Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Curtiss-Wright Corporation (NYSE:CW) but similarly valued. We will take a look at Cousins Properties Incorporated (NYSE:CUZ), Jefferies Financial Group Inc. (NYSE:JEF), Synovus Financial Corp. (NYSE:SNV), and Syneos Health, Inc. (NASDAQ:SYNH). This group of stocks’ market caps match CW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CUZ | 18 | 185225 | -4 |
| JEF | 31 | 627544 | -3 |
| SNV | 36 | 461625 | 0 |
| SYNH | 20 | 211629 | 0 |
| Average | 26.25 | 371506 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $372 million. That figure was $392 million in CW’s case. Synovus Financial Corp. (NYSE:SNV) is the most popular stock in this table. On the other hand Cousins Properties Incorporated (NYSE:CUZ) is the least popular one with only 18 bullish hedge fund positions. Curtiss-Wright Corporation (NYSE:CW) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on CW, though not to the same extent, as the stock returned 6.4% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
