Were These Hedge Funds Right About Crowding Into Corelogic Inc (CLGX)?

In this article we are going to use hedge fund sentiment as a tool and determine whether Corelogic Inc (NYSE:CLGX) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Corelogic Inc (NYSE:CLGX) has experienced an increase in hedge fund interest lately. Corelogic Inc (NYSE:CLGX) was in 35 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 31 hedge funds in our database with CLGX positions at the end of the first quarter. Our calculations also showed that CLGX 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 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 S&P 500 ETFs by 58 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 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.

Paul Marshall of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best high dividend stocks to buy to identify high dividend stocks with upside potential in this low interest rate environment. 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. Keeping this in mind we’re going to view the recent hedge fund action encompassing Corelogic Inc (NYSE:CLGX).

What does smart money think about Corelogic Inc (NYSE:CLGX)?

At Q2’s end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the first quarter of 2020. On the other hand, there were a total of 23 hedge funds with a bullish position in CLGX a year ago. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

More specifically, Senator Investment Group was the largest shareholder of Corelogic Inc (NYSE:CLGX), with a stake worth $282.7 million reported as of the end of June. Trailing Senator Investment Group was D E Shaw, which amassed a stake valued at $143.1 million. Fisher Asset Management, Nitorum Capital, and MFN 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 MFN Partners allocated the biggest weight to Corelogic Inc (NYSE:CLGX), around 11.24% of its 13F portfolio. Senator Investment Group is also relatively very bullish on the stock, dishing out 9.77 percent of its 13F equity portfolio to CLGX.

As one would reasonably expect, some big names have been driving this bullishness. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, initiated the most outsized position in Corelogic Inc (NYSE:CLGX). Senator Investment Group had $282.7 million invested in the company at the end of the quarter. Farhad Nanji and Michael DeMichele’s MFN Partners also made a $80.7 million investment in the stock during the quarter. The other funds with brand new CLGX positions are Carl Tiedemann and Michael Tiedemann’s TIG Advisors, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Ken Grossman and Glen Schneider’s SG Capital Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Corelogic Inc (NYSE:CLGX) but similarly valued. These stocks are Columbia Sportswear Company (NASDAQ:COLM), United Therapeutics Corporation (NASDAQ:UTHR), Levi Strauss & Co. (NYSE:LEVI), FLIR Systems, Inc. (NASDAQ:FLIR), Axalta Coating Systems Ltd (NYSE:AXTA), Nielsen Holdings plc (NYSE:NLSN), and Comerica Incorporated (NYSE:CMA). This group of stocks’ market caps are similar to CLGX’s market cap.

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As you can see these stocks had an average of 32.3 hedge funds with bullish positions and the average amount invested in these stocks was $664 million. That figure was $887 million in CLGX’s case. Axalta Coating Systems Ltd (NYSE:AXTA) is the most popular stock in this table. On the other hand Levi Strauss & Co. (NYSE:LEVI) is the least popular one with only 16 bullish hedge fund positions. Corelogic Inc (NYSE:CLGX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CLGX is 69.6. 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 gained 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. Hedge funds were also right about betting on CLGX as the stock returned 15% since the end of Q2 (through 10/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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