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Hedge Funds Aren’t Crazy About Cato Corp (CATO) Anymore

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Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Cato Corp (NYSE:CATO).

Cato Corp (NYSE:CATO) was in 11 hedge funds’ portfolios at the end of September. CATO has seen a decrease in support from the world’s most successful money managers in recent months. There were 11 hedge funds in our database with CATO holdings at the end of September. At the end of this article we will also compare CATO to other stocks including Rofin-Sinar Technologies (NASDAQ:RSTI), Infinity Property and Casualty Corp. (NASDAQ:IPCC), and AC Immune Ltd (NASDAQ:ACIU) to get a better sense of its popularity.

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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

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Now, let’s go over the fresh action regarding Cato Corp (NYSE:CATO).

How have hedgies been trading Cato Corp (NYSE:CATO)?

At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decline of 27% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CATO over the last 5 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

CATO Chart

According to Insider Monkey’s hedge fund database, Chuck Royce’s Royce & Associates has the number one position in Cato Corp (NYSE:CATO), worth close to $55.2 million, amounting to 0.4% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies, one of the largest hedge funds in the world, which manages a $6.3 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Remaining professional money managers that are bullish include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, D. E. Shaw’s D E Shaw and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

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