Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018. This means hedge funds that are allocating a higher percentage of their portfolio to small-cap stocks were probably underperforming the market. However, this also means that as small-cap stocks start to mean revert, these hedge funds will start delivering better returns than the S&P 500 Index funds. In this article, we will take a look at what hedge funds think about Seacor Holdings, Inc. (NYSE:CKH).
Is Seacor Holdings, Inc. (NYSE:CKH) worth your attention right now? Investors who are in the know are turning less bullish. The number of long hedge fund positions fell by 1 recently. Our calculations also showed that CKH 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’ 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 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 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.
Chuck Royce of Royce & Associates
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s go over the key hedge fund action encompassing Seacor Holdings, Inc. (NYSE:CKH).
What does smart money think about Seacor Holdings, Inc. (NYSE:CKH)?
Heading into the fourth quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the second quarter of 2019. On the other hand, there were a total of 19 hedge funds with a bullish position in CKH a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the largest position in Seacor Holdings, Inc. (NYSE:CKH). Royce & Associates has a $65.4 million position in the stock, comprising 0.6% of its 13F portfolio. On Royce & Associates’s heels is Renaissance Technologies, which holds a $60.2 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism comprise David Harding’s Winton Capital Management, Paul Marshall and Ian Wace’s Marshall Wace and David E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to Seacor Holdings, Inc. (NYSE:CKH), around 0.61% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, designating 0.1 percent of its 13F equity portfolio to CKH.
Because Seacor Holdings, Inc. (NYSE:CKH) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there exists a select few hedgies who were dropping their entire stakes last quarter. It’s worth mentioning that Noam Gottesman’s GLG Partners dumped the biggest position of the 750 funds monitored by Insider Monkey, totaling about $1.9 million in call options, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund sold off about $0.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Seacor Holdings, Inc. (NYSE:CKH) but similarly valued. These stocks are AnaptysBio, Inc. (NASDAQ:ANAB), Urstadt Biddle Properties Inc (NYSE:UBA), So-Young International Inc. (NASDAQ:SY), and Star Bulk Carriers Corp. (NASDAQ:SBLK). All of these stocks’ market caps are closest to CKH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ANAB | 15 | 329233 | -1 |
| UBA | 11 | 36367 | 3 |
| SY | 2 | 31447 | -3 |
| SBLK | 12 | 445578 | 1 |
| Average | 10 | 210656 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $211 million. That figure was $145 million in CKH’s case. AnaptysBio, Inc. (NASDAQ:ANAB) is the most popular stock in this table. On the other hand So-Young International Inc. (NASDAQ:SY) is the least popular one with only 2 bullish hedge fund positions. Seacor Holdings, Inc. (NYSE:CKH) 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 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. Unfortunately CKH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CKH were disappointed as the stock returned -10% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
