Should You Follow the Smart Money Out of Casey’s General Stores Inc (CASY)?

The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Casey’s General Stores Inc (NASDAQ:CASY) from the perspective of those elite funds.

Is Casey’s General Stores Inc (NASDAQ:CASY) a sound investment today? The best stock pickers are reducing their bets on the stock. The number of bullish hedge fund bets were cut by 6 lately. CASY was in 22 hedge funds’ portfolios at the end of September. There were 28 hedge funds in our database with CASY 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 The Hain Celestial Group, Inc. (NASDAQ:HAIN), Highwoods Properties Inc (NYSE:HIW), and Zions Bancorporation (NASDAQ:ZION) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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What have hedge funds been doing with Casey’s General Stores Inc (NASDAQ:CASY)?

At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 21% drop from the previous quarter. That followed 2 quarters in which smart money ownership surged by 75%. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Richard Chilton’s Chilton Investment Company has the number one position in Casey’s General Stores Inc (NASDAQ:CASY), worth close to $120 million, accounting for 4.7% of its total 13F portfolio. The second largest stake is held by Gabriel Plotkin of Melvin Capital Management, with a $105.1 million position; 2.8% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish encompass Steve Cohen’s Point72 Asset Management, Cliff Asness’ AQR Capital Management and Gabriel Plotkin’s Melvin Capital Management.

Seeing as Casey’s General Stores Inc (NASDAQ:CASY) has witnessed bearish sentiment from hedge fund managers, we can see that there exists a select few funds that decided to sell off their full holdings in the third quarter. At the top of the heap, Bain Capital’s Brookside Capital said goodbye to the biggest investment of the “upper crust” of funds watched by Insider Monkey, worth about $91.5 million in stock, and Clint Carlson’s Carlson Capital was right behind this move, as the fund dropped about $11.8 million worth of shares. These moves are intriguing to say the least, as total hedge fund interest was cut by 6 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Casey’s General Stores Inc (NASDAQ:CASY) but similarly valued. These stocks are The Hain Celestial Group, Inc. (NASDAQ:HAIN), Highwoods Properties Inc (NYSE:HIW), Zions Bancorporation (NASDAQ:ZION), and Dicks Sporting Goods Inc (NYSE:DKS). All of these stocks’ market caps are closest to CASY’s market cap.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $411 million. That figure was $448 million in CASY’s case. Dicks Sporting Goods Inc (NYSE:DKS) is the most popular stock in this table. On the other hand Highwoods Properties Inc (NYSE:HIW) is the least popular one with only 5 bullish hedge fund positions. Casey’s General Stores Inc (NASDAQ:CASY) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard DKS might be a better candidate to consider a long position in.

Disclosure: None