Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 835 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Cornerstone Building Brands, Inc. (NYSE:CNR).
Cornerstone Building Brands, Inc. (NYSE:CNR) investors should be aware of an increase in enthusiasm from smart money recently. CNR was in 26 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 18 hedge funds in our database with CNR positions at the end of the previous quarter. Our calculations also showed that CNR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Andy Redleaf of Whitebox Advisors
We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to view the fresh hedge fund action surrounding Cornerstone Building Brands, Inc. (NYSE:CNR).
How have hedgies been trading Cornerstone Building Brands, Inc. (NYSE:CNR)?
At the end of the fourth quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 44% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CNR over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Cornerstone Building Brands, Inc. (NYSE:CNR) was held by Coliseum Capital, which reported holding $46.3 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $19.4 million position. Other investors bullish on the company included Guardian Point Capital, Lonestar Capital Management, and D E Shaw. In terms of the portfolio weights assigned to each position Coliseum Capital allocated the biggest weight to Cornerstone Building Brands, Inc. (NYSE:CNR), around 12.33% of its 13F portfolio. Covalent Capital Partners is also relatively very bullish on the stock, earmarking 7.3 percent of its 13F equity portfolio to CNR.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Guardian Point Capital, managed by Tim David, established the most valuable position in Cornerstone Building Brands, Inc. (NYSE:CNR). Guardian Point Capital had $12.8 million invested in the company at the end of the quarter. Ali Motamed’s Invenomic Capital Management also initiated a $1.9 million position during the quarter. The other funds with brand new CNR positions are Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, Jon Bauer’s Contrarian Capital, and Andy Redleaf’s Whitebox Advisors.
Let’s also examine hedge fund activity in other stocks similar to Cornerstone Building Brands, Inc. (NYSE:CNR). We will take a look at Celestica Inc. (NYSE:CLS), Tenneco Inc (NYSE:TEN), National Western Life Insurance Company (NASDAQ:NWLI), and Nova Measuring Instruments Ltd. (NASDAQ:NVMI). All of these stocks’ market caps are closest to CNR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CLS | 13 | 97259 | 0 |
| TEN | 21 | 143149 | 8 |
| NWLI | 6 | 15097 | -3 |
| NVMI | 10 | 203261 | 0 |
| Average | 12.5 | 114692 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $115 million. That figure was $114 million in CNR’s case. Tenneco Inc (NYSE:TEN) is the most popular stock in this table. On the other hand National Western Life Insurance Company (NASDAQ:NWLI) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Cornerstone Building Brands, Inc. (NYSE:CNR) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st and still beat the market by 12.9 percentage points. Unfortunately CNR wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CNR were disappointed as the stock returned -43.1% during the four months of 2020 (through May 1st) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
