Were Hedge Funds Right About Crowding Into Clarivate Plc (CCC)?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Clarivate Plc (NYSE:CCC) changed recently.

Is Clarivate Plc (NYSE:CCC) a marvelous investment today? The best stock pickers were taking an optimistic view. The number of bullish hedge fund bets rose by 17 lately. Clarivate Plc (NYSE:CCC) was in 45 hedge funds’ portfolios at the end of June. The all time high for this statistics is 45. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CCC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ian Wace of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind we’re going to take a peek at the key hedge fund action surrounding Clarivate Plc (NYSE:CCC).

What does smart money think about Clarivate Plc (NYSE:CCC)?

At second quarter’s end, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, a change of 61% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards CCC over the last 20 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Among these funds, Select Equity Group held the most valuable stake in Clarivate Plc (NYSE:CCC), which was worth $515.3 million at the end of the third quarter. On the second spot was D1 Capital Partners which amassed $203.7 million worth of shares. 40 North Management, JS Capital, and Brahman Capital 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 Antipodean Advisors allocated the biggest weight to Clarivate Plc (NYSE:CCC), around 13.14% of its 13F portfolio. Strycker View Capital is also relatively very bullish on the stock, dishing out 8.42 percent of its 13F equity portfolio to CCC.

Consequently, key money managers were breaking ground themselves. Maplelane Capital, managed by Leon Shaulov, assembled the most outsized position in Clarivate Plc (NYSE:CCC). Maplelane Capital had $31.5 million invested in the company at the end of the quarter. Amit Nitin Doshi’s Harbor Spring Capital also initiated a $29.2 million position during the quarter. The following funds were also among the new CCC investors: Renaissance Technologies, Usman Waheed’s Strycker View Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Clarivate Plc (NYSE:CCC) but similarly valued. These stocks are Charles River Laboratories International Inc. (NYSE:CRL), Natura &Co Holding S.A. (NYSE:NTCO), Brookfield Renewable Partners L.P. (NYSE:BEP), Elanco Animal Health Incorporated (NYSE:ELAN), James Hardie Industries plc (NYSE:JHX), IPG Photonics Corporation (NASDAQ:IPGP), and F5 Networks, Inc. (NASDAQ:FFIV). All of these stocks’ market caps are closest to CCC’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.1 hedge funds with bullish positions and the average amount invested in these stocks was $386 million. That figure was $1301 million in CCC’s case. Charles River Laboratories International Inc. (NYSE:CRL) is the most popular stock in this table. On the other hand Natura &Co Holding S.A. (NYSE:NTCO) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Clarivate Plc (NYSE:CCC) is more popular among hedge funds. Our overall hedge fund sentiment score for CCC is 90. 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 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 returned 30% in 2020 through October 23rd but still managed to beat the market by 21 percentage points. Hedge funds were also right about betting on CCC as the stock returned 31.1% since the end of June (through 10/23) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Disclosure: None. This article was originally published at Insider Monkey.