Should You Consider Cavco Industries, Inc. (CVCO)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Ackman’s recent Valeant losses). However, it is still good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Cavco Industries, Inc. (NASDAQ:CVCO).

Cavco Industries, Inc. (NASDAQ:CVCO) investors should be aware of a decrease in activity from the world’s largest hedge funds of late. 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 Materion Corp (NYSE:MTRN), Quad/Graphics, Inc. (NYSE:QUAD), and Great Southern Bancorp, Inc. (NASDAQ:GSBC) to gather more data points.

With all of this in mind, let’s view the latest action regarding Cavco Industries, Inc. (NASDAQ:CVCO).

What have hedge funds been doing with Cavco Industries, Inc. (NASDAQ:CVCO)?

At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from one quarter earlier. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Third Avenue Management, managed by Martin Whitman, holds the biggest position in Cavco Industries, Inc. (NASDAQ:CVCO). Third Avenue Management has a $94.5 million position in the stock, comprising 2.6% of its 13F portfolio. Sitting at the No. 2 spot is GAMCO Investors, led by Mario Gabelli, holding a $27.8 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining peers with similar optimism encompass Jim Simons’ Renaissance Technologies, Chuck Royce’s Royce & Associates and J. Carlo Cannell’s Cannell Capital.

Seeing as Cavco Industries, Inc. (NASDAQ:CVCO) has witnessed a declination in interest from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of funds who sold off their entire stakes in the third quarter. Interestingly, Israel Englander’s Millennium Management dropped the largest stake of the “upper crust” of funds monitored by Insider Monkey, totaling about $1.9 million in stock, and Ken Grossman and Glen Schneider’s SG Capital Management was right behind this move, as the fund dumped about $1.9 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 4 funds in the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Cavco Industries, Inc. (NASDAQ:CVCO) but similarly valued. We will take a look at Materion Corp (NYSE:MTRN), Quad/Graphics, Inc. (NYSE:QUAD), Great Southern Bancorp, Inc. (NASDAQ:GSBC), and Movado Group, Inc (NYSE:MOV). All of these stocks’ market caps are closest to CVCO’s market cap.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $154 million in CVCO’s case. Quad/Graphics, Inc. (NYSE:QUAD) is the most popular stock in this table. On the other hand Great Southern Bancorp, Inc. (NASDAQ:GSBC) is the least popular one with only 4 bullish hedge fund positions. Cavco Industries, Inc. (NASDAQ:CVCO) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MOV might be a better candidate to consider a long position.