Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Cadiz Inc (CDZI): Hedge Funds Are Buying, Should You?

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Micron and Anadarko Petroleum, have not done well during the last 12 months ending in October due to various reasons. Nevertheless, the data reflects that elite investors’ consensus picks have done well on average. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last four quarters ending in October and sixty three percent of these 30 stocks outperformed the market. S&P 500 Index returned only 5.2% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Cadiz Inc (NASDAQ:CDZI) from the perspective of those elite funds.

Cadiz Inc (NASDAQ:CDZI) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of the third quarter of 2015. At the end of this article, we will also compare Cadiz Inc (NASDAQ:CDZI) to other stocks, including Layne Christensen Company (NASDAQ:LAYN), BioScrip Inc. (NASDAQ:BIOS), and Harvard Bioscience, Inc. (NASDAQ:HBIO) to get a better sense of its popularity.

Follow Cadiz Inc (NASDAQ:CDZI)
Trade (NASDAQ:CDZI) Now!

According to most traders, hedge funds are seen as worthless, old investment tools of the years past. While there are more than 8000 funds with their doors open at the moment, We hone in on the top tier of this group, around 700 funds. These money managers command the lion’s share of all hedge funds’ total asset base, and by monitoring their matchless picks, Insider Monkey has brought to light many investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Now, we’re going to take a look at the key action encompassing Cadiz Inc (NASDAQ:CDZI).

What have hedge funds been doing with Cadiz Inc (NASDAQ:CDZI)?

Heading into Q4, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, flat over the last quarter. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Odey Asset Management Group, managed by Crispin Odey, holds the most valuable position in Cadiz Inc (NASDAQ:CDZI). Odey Asset Management Group has a $15.2 million position in the stock, comprising 1.2% of its 13F portfolio. On Odey Asset Management Group’s heels is Elkhorn Partners, managed by Alan S. Parsow, which holds a $4.1 million position; the fund has 2.6% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism comprise J. Alan Reid, Jr.’s Forward Management, Benjamin J Taylor’s Sophrosyne Capital, and Matthew Hulsizer’s PEAK6 Capital Management.

We view hedge fund selling in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Royce & Associates. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically, a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case here because only one of the 700+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Forward Management).

Let’s check out the hedge fund activity in other stocks – not necessarily in the same industry as Cadiz Inc (NASDAQ:CDZI) but similarly valued. We will take a look at Layne Christensen Company (NASDAQ:LAYN), BioScrip Inc. (NASDAQ:BIOS), Harvard Bioscience, Inc. (NASDAQ:HBIO), and Alcobra Ltd (NASDAQ:ADHD). This group of stocks’ market valuations matches Cadiz Inc (NASDAQ:CDZI)’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LAYN 9 46127 -7
BIOS 14 38623 -1
HBIO 7 7536 1
ADHD 14 73966 2

As you can see, these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $20 million in Cadiz Inc (NASDAQ:CDZI)’s case. BioScrip Inc. (NASDAQ:BIOS) is the most popular stock in this table. On the other hand, Harvard Bioscience, Inc. (NASDAQ:HBIO) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks, Cadiz Inc (NASDAQ:CDZI) is even less popular than Harvard Bioscience, Inc. (NASDAQ:HBIO). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.