Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards CACI International Inc (NYSE:CACI).
CACI International Inc (NYSE:CACI) was in 29 hedge funds’ portfolios at the end of June. CACI has seen an increase in hedge fund sentiment in recent months. There were 13 hedge funds in our database with CACI holdings at the end of the previous quarter. Our calculations also showed that CACI isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a glance at the key hedge fund action surrounding CACI International Inc (NYSE:CACI).
Hedge fund activity in CACI International Inc (NYSE:CACI)
Heading into the third quarter of 2019, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 123% from the previous quarter. By comparison, 14 hedge funds held shares or bullish call options in CACI a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Citadel Investment Group, managed by Ken Griffin, holds the largest position in CACI International Inc (NYSE:CACI). Citadel Investment Group has a $92 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Murray Stahl of Horizon Asset Management, with a $64.9 million position; the fund has 1.8% of its 13F portfolio invested in the stock. Other peers with similar optimism consist of Noam Gottesman’s GLG Partners, Israel Englander’s Millennium Management and Cliff Asness’s AQR Capital Management.
Now, specific money managers have jumped into CACI International Inc (NYSE:CACI) headfirst. D E Shaw, managed by D. E. Shaw, created the most valuable position in CACI International Inc (NYSE:CACI). D E Shaw had $21.7 million invested in the company at the end of the quarter. Renaissance Technologies also made a $11.1 million investment in the stock during the quarter. The other funds with brand new CACI positions are Joel Greenblatt’s Gotham Asset Management, Paul Tudor Jones’s Tudor Investment Corp, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as CACI International Inc (NYSE:CACI) but similarly valued. These stocks are LendingTree, Inc (NASDAQ:TREE), Cronos Group Inc. (NASDAQ:CRON), Insperity Inc (NYSE:NSP), and Ascendis Pharma A/S (NASDAQ:ASND). This group of stocks’ market valuations match CACI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TREE | 28 | 142128 | 11 |
| CRON | 8 | 25378 | 1 |
| NSP | 24 | 391193 | 0 |
| ASND | 33 | 2602951 | -2 |
| Average | 23.25 | 790413 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $790 million. That figure was $393 million in CACI’s case. Ascendis Pharma A/S (NASDAQ:ASND) is the most popular stock in this table. On the other hand Cronos Group Inc. (NASDAQ:CRON) is the least popular one with only 8 bullish hedge fund positions. CACI International Inc (NYSE:CACI) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks (view the video below) among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on CACI as the stock returned 13% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
