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2019 Review: Top Hedge Fund Stocks vs. CBRE Group, Inc. (CBRE)

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds’ top 3 stock picks returned 45.7% last year and beat the S&P 500 ETFs by 14.5 percentage points. That’s a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

CBRE Group, Inc. (NYSE:CBRE) shareholders have witnessed an increase in hedge fund sentiment recently. Our calculations also showed that CBRE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jeff Ubben VALUEACT CAPITAL

Jeffrey Ubben of ValueAct Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind let’s take a look at the new hedge fund action surrounding CBRE Group, Inc. (NYSE:CBRE).

What have hedge funds been doing with CBRE Group, Inc. (NYSE:CBRE)?

At Q3’s end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CBRE over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, ValueAct Capital was the largest shareholder of CBRE Group, Inc. (NYSE:CBRE), with a stake worth $542.1 million reported as of the end of September. Trailing ValueAct Capital was Cantillon Capital Management, which amassed a stake valued at $366.3 million. Ariel Investments, Adage Capital Management, and McKinley Capital Management 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 ValueAct Capital allocated the biggest weight to CBRE Group, Inc. (NYSE:CBRE), around 5.85% of its 13F portfolio. Cantillon Capital Management is also relatively very bullish on the stock, setting aside 3.56 percent of its 13F equity portfolio to CBRE.

As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Castle Hook Partners, managed by Josh Donfeld and David Rogers, initiated the most valuable position in CBRE Group, Inc. (NYSE:CBRE). Castle Hook Partners had $9.8 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $8 million position during the quarter. The following funds were also among the new CBRE investors: Matthew Tewksbury’s Stevens Capital Management, Israel Englander’s Millennium Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as CBRE Group, Inc. (NYSE:CBRE) but similarly valued. These stocks are Western Digital Corporation (NASDAQ:WDC), New Oriental Education & Technology Group Inc. (NYSE:EDU), HCP, Inc. (NYSE:HCP), and Alexandria Real Estate Equities Inc (NYSE:ARE). This group of stocks’ market values are similar to CBRE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WDC 35 905397 10
EDU 35 1511145 3
HCP 25 562264 -1
ARE 21 343145 -6
Average 29 830488 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $830 million. That figure was $1096 million in CBRE’s case. Western Digital Corporation (NASDAQ:WDC) is the most popular stock in this table. On the other hand Alexandria Real Estate Equities Inc (NYSE:ARE) is the least popular one with only 21 bullish hedge fund positions. CBRE Group, Inc. (NYSE:CBRE) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. A small number of hedge funds were also right about betting on CBRE as the stock returned 53.1% in 2019 and outclassed the market by an even larger margin.
5 Most Popular Stocks Among Hedge Funds
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.

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