Is Credit Suisse Group AG (NYSE:CS) a buy right now? Investors who are in the know are betting on the stock. The number of long hedge fund positions improved by 1 lately. Our calculations also showed that CS isn’t among the 30 most popular stocks among hedge funds. CS was in 14 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 13 hedge funds in our database with CS holdings at the end of the previous quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 32 percentage points since May 2014 through March 12, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to take a gander at the latest hedge fund action surrounding Credit Suisse Group AG (NYSE:CS).
Hedge fund activity in Credit Suisse Group AG (NYSE:CS)
At the end of the fourth quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the second quarter of 2018. By comparison, 10 hedge funds held shares or bullish call options in CS a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Credit Suisse Group AG (NYSE:CS) was held by Renaissance Technologies, which reported holding $58.8 million worth of stock at the end of September. It was followed by Masters Capital Management with a $21.7 million position. Other investors bullish on the company included PEAK6 Capital Management, Orbis Investment Management, and Two Sigma Advisors.
As one would reasonably expect, specific money managers were breaking ground themselves. Springhouse Capital Management, managed by Brian Gaines, established the most outsized position in Credit Suisse Group AG (NYSE:CS). Springhouse Capital Management had $5.8 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also made a $1.1 million investment in the stock during the quarter. The only other fund with a new position in the stock is Israel Englander’s Millennium Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Credit Suisse Group AG (NYSE:CS) but similarly valued. These stocks are O’Reilly Automotive Inc (NASDAQ:ORLY), Roper Technologies, Inc. (NYSE:ROP), TD Ameritrade Holding Corp. (NASDAQ:AMTD), and Johnson Controls International plc (NYSE:JCI). This group of stocks’ market values are closest to CS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ORLY | 45 | 1999588 | 2 |
| ROP | 29 | 647487 | -3 |
| AMTD | 17 | 494936 | -1 |
| JCI | 26 | 644185 | 10 |
| Average | 29.25 | 946549 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $947 million. That figure was $144 million in CS’s case. O’Reilly Automotive Inc (NASDAQ:ORLY) is the most popular stock in this table. On the other hand TD Ameritrade Holding Corp. (NASDAQ:AMTD) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Credit Suisse Group AG (NYSE:CS) is even less popular than AMTD. 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. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately CS wasn’t in this group. Hedge funds that bet on CS were disappointed as the stock returned 11% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
