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 Cabelas Inc (NYSE:CAB).
Is Cabelas Inc (NYSE:CAB) undervalued? Money managers are betting on the stock. The number of long hedge fund bets improved by 7 in recent months. CAB was in 34 hedge funds’ portfolios at the end of September. There were 27 hedge funds in our database with CAB positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Teledyne Technologies Incorporated (NYSE:TDY), Genesee & Wyoming Inc (NYSE:GWR), and Umpqua Holdings Corp (NASDAQ:UMPQ) to gather more data points.
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.
With all of this in mind, we’re going to take a look at the recent action surrounding Cabelas Inc (NYSE:CAB).
How are hedge funds trading Cabelas Inc (NYSE:CAB)?
Heading into the fourth quarter of 2016, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a surge of 26% from the second quarter of 2016. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Paul Singer’s Elliott Management has the number one position in Cabelas Inc (NYSE:CAB), worth close to $347.8 million and corresponding to 2.8% of its total 13F portfolio. The second largest stake is held by HG Vora Capital Management, led by Parag Vora, holding a $71.4 million position; the fund has 9.2% of its 13F portfolio invested in the stock. Other peers with similar optimism include Ken Fisher’s Fisher Asset Management, Dmitry Balyasny’s Balyasny Asset Management and Eric Mindich’s Eton Park Capital.