How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Clarivate Plc (NYSE:CLVT) and determine whether hedge funds had an edge regarding this stock.
Is Clarivate Plc (NYSE:CLVT) a good investment now? Prominent investors were becoming less hopeful. The number of bullish hedge fund bets were trimmed by 9 recently. Clarivate Plc (NYSE:CLVT) was in 32 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 45. Our calculations also showed that CLVT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 41 hedge funds in our database with CLVT positions at the end of the second quarter.
David Blood of Generation Investment Management
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. With all of this in mind let’s take a look at the recent hedge fund action surrounding Clarivate Plc (NYSE:CLVT).
Do Hedge Funds Think CLVT Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CLVT over the last 25 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
More specifically, Leonard Green & Partners was the largest shareholder of Clarivate Plc (NYSE:CLVT), with a stake worth $2555 million reported as of the end of September. Trailing Leonard Green & Partners was Select Equity Group, which amassed a stake valued at $1157.1 million. Generation Investment Management, 40 North Management, and Two Creeks Capital Management 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 Leonard Green & Partners allocated the biggest weight to Clarivate Plc (NYSE:CLVT), around 19.75% of its 13F portfolio. Antipodean Advisors is also relatively very bullish on the stock, designating 6.98 percent of its 13F equity portfolio to CLVT.
Since Clarivate Plc (NYSE:CLVT) has faced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of money managers that elected to cut their positions entirely by the end of the third quarter. At the top of the heap, Jeffrey Altman’s Owl Creek Asset Management said goodbye to the biggest stake of the 750 funds watched by Insider Monkey, valued at close to $40.2 million in stock, and George Soros’s Soros Fund Management was right behind this move, as the fund dropped about $39.8 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 9 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Clarivate Plc (NYSE:CLVT). These stocks are Alliant Energy Corporation (NYSE:LNT), Zendesk Inc (NYSE:ZEN), News Corp (NASDAQ:NWSA), Loews Corporation (NYSE:L), Solaredge Technologies Inc (NASDAQ:SEDG), Nordson Corporation (NASDAQ:NDSN), and W.P. Carey Inc. (NYSE:WPC). This group of stocks’ market caps match CLVT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LNT | 17 | 76693 | 1 |
| ZEN | 53 | 1557704 | 1 |
| NWSA | 34 | 737689 | -3 |
| L | 27 | 175121 | -1 |
| SEDG | 33 | 594467 | -4 |
| NDSN | 29 | 310857 | -5 |
| WPC | 24 | 142763 | -5 |
| Average | 31 | 513613 | -2.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $514 million. That figure was $4724 million in CLVT’s case. Zendesk Inc (NYSE:ZEN) is the most popular stock in this table. On the other hand Alliant Energy Corporation (NYSE:LNT) is the least popular one with only 17 bullish hedge fund positions. Clarivate Plc (NYSE:CLVT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CLVT is 38.2. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 beat the market again by 3.6 percentage points. Unfortunately, CLVT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CLVT were disappointed as the stock returned -24.8% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.
Follow Clarivate Plc (NYSE:CLVT)
Follow Clarivate Plc (NYSE:CLVT)
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Disclosure: None. This article was originally published at Insider Monkey.
