Should You Avoid Companhia Brasileira de Distrib. (ADR) (CBD)?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track more than 700 prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile gigantic failures like hedge funds’ recent losses in Valeant. Let’s take a closer look at what the funds we track think about Companhia Brasileira de Distrib. (ADR) (NYSE:CBD) in this article.

Is Companhia Brasileira de Distrib. (ADR) (NYSE:CBD) an attractive investment today? Money managers are getting less optimistic. The number of bullish hedge fund bets shrunk by 1 recently. CBD was in 8 hedge funds’ portfolios at the end of the third quarter of 2015. There were 9 hedge funds in our database with CBD positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Radian Group Inc (NYSE:RDN), Corelogic Inc (NYSE:CLGX), and ENSCO PLC (NYSE:ESV) to gather more data points.

According to most shareholders, hedge funds are assumed to be worthless, old investment vehicles of the past. While there are greater than 8000 funds with their doors open at present, We choose to focus on the elite of this group, about 700 funds. Most estimates calculate that this group of people manage the lion’s share of the smart money’s total asset base, and by tracking their unrivaled investments, Insider Monkey has discovered a few investment strategies that have historically outpaced the broader indices. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

With all of this in mind, let’s take a gander at the fresh action surrounding Companhia Brasileira de Distrib. (ADR) (NYSE:CBD).

What have hedge funds been doing with Companhia Brasileira de Distrib. (ADR) (NYSE:CBD)?

At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decline of 11% from the previous quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Ken Fisher’s Fisher Asset Management has the largest position in Companhia Brasileira de Distrib. (ADR) (NYSE:CBD), worth close to $16 million, corresponding to less than 0.1% of its total 13F portfolio. The second largest stake is held by AQR Capital Management, led by Cliff Asness, holding an $4.5 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish comprise Jim Simons’s Renaissance Technologies, Israel Englander’s Millennium Management and Glenn Russell Dubin’s Highbridge Capital Management.

Seeing as Companhia Brasileira de Distrib. (ADR) (NYSE:CBD) has faced a declination in interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of hedge funds that slashed their full holdings last quarter. At the top of the heap, Lee Munder’s Lee Munder Capital Group sold off the biggest position of the 700 funds monitored by Insider Monkey, comprising close to $4.1 million in stock, and Louis Bacon’s Moore Global Investments was right behind this move, as the fund said goodbye to about $1.2 million worth of shares. These moves are interesting, as total hedge fund interest fell by 1 fund last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Companhia Brasileira de Distrib. (ADR) (NYSE:CBD). We will take a look at Radian Group Inc (NYSE:RDN), Corelogic Inc (NYSE:CLGX), ENSCO PLC (NYSE:ESV), and First Horizon National Corporation (NYSE:FHN). This group of stocks’ market values resemble CBD’s market value.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $426 million. That figure was $31 million in CBD’s case. Radian Group Inc (NYSE:RDN) is the most popular stock in this table. On the other hand First Horizon National Corporation (NYSE:FHN) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Companhia Brasileira de Distrib. (ADR) (NYSE:CBD) is even less popular than FHN with just 8 funds invested. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.