Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards CDW Corporation (NASDAQ:CDW) at the end of the third quarter and determine whether the smart money was really smart about this stock.
Is CDW Corporation (NASDAQ:CDW) a buy right now? Prominent investors were becoming more confident. The number of bullish hedge fund positions improved by 10 recently. CDW Corporation (NASDAQ:CDW) was in 37 hedge funds’ portfolios at the end of September. The all time high for this statistic is 43. Our calculations also showed that CDW isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 27 hedge funds in our database with CDW holdings at the end of June.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s check out the latest hedge fund action surrounding CDW Corporation (NASDAQ:CDW).
Thomas Bancroft of Makaira Partners
Do Hedge Funds Think CDW Is A Good Stock To Buy Now?
At Q3’s end, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 37% from one quarter earlier. On the other hand, there were a total of 30 hedge funds with a bullish position in CDW a year ago. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, Select Equity Group held the most valuable stake in CDW Corporation (NASDAQ:CDW), which was worth $1244.7 million at the end of the third quarter. On the second spot was Gobi Capital which amassed $253.2 million worth of shares. AQR Capital Management, Balyasny Asset Management, and Makaira Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position LFL Advisers allocated the biggest weight to CDW Corporation (NASDAQ:CDW), around 22.81% of its 13F portfolio. Makaira Partners is also relatively very bullish on the stock, earmarking 11.12 percent of its 13F equity portfolio to CDW.
As industrywide interest jumped, specific money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the biggest position in CDW Corporation (NASDAQ:CDW). Balyasny Asset Management had $61 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $4.4 million investment in the stock during the quarter. The following funds were also among the new CDW investors: Jinghua Yan’s TwinBeech Capital, Renaissance Technologies, and Qing Li’s Sciencast Management.
Let’s go over hedge fund activity in other stocks similar to CDW Corporation (NASDAQ:CDW). These stocks are Avantor, Inc. (NYSE:AVTR), Ryanair Holdings plc (NASDAQ:RYAAY), Franco-Nevada Corporation (NYSE:FNV), AmerisourceBergen Corporation (NYSE:ABC), Cheniere Energy, Inc. (NYSE:LNG), Horizon Therapeutics Public Limited Company (NASDAQ:HZNP), and Expedia Group Inc (NASDAQ:EXPE). All of these stocks’ market caps are similar to CDW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AVTR | 53 | 2439815 | 9 |
| RYAAY | 15 | 411390 | 0 |
| FNV | 26 | 951083 | 3 |
| ABC | 44 | 1214780 | 1 |
| LNG | 49 | 3103167 | 0 |
| HZNP | 60 | 4573780 | 4 |
| EXPE | 78 | 6470916 | -9 |
| Average | 46.4 | 2737847 | 1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 46.4 hedge funds with bullish positions and the average amount invested in these stocks was $2738 million. That figure was $1906 million in CDW’s case. Expedia Group Inc (NASDAQ:EXPE) is the most popular stock in this table. On the other hand Ryanair Holdings plc (NASDAQ:RYAAY) is the least popular one with only 15 bullish hedge fund positions. CDW Corporation (NASDAQ:CDW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CDW is 53.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on CDW as the stock returned 4.1% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.
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Disclosure: None. This article was originally published at Insider Monkey.
