We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Cavco Industries, Inc. (NASDAQ:CVCO) based on that data.
Cavco Industries, Inc. (NASDAQ:CVCO) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 20 hedge funds’ portfolios at the end of the first quarter of 2020. At the end of this article we will also compare CVCO to other stocks including Edgewell Personal Care Company (NYSE:EPC), BioTelemetry, Inc. (NASDAQ:BEAT), and Office Properties Income Trust (NASDAQ:OPI) to get a better sense of its popularity.
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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 S&P 500 ETFs by more than 58 percentage points since March 2017 (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 stocks that are in our short portfolio.
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 take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a gander at the recent hedge fund action encompassing Cavco Industries, Inc. (NASDAQ:CVCO).
How are hedge funds trading Cavco Industries, Inc. (NASDAQ:CVCO)?
Heading into the second quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in CVCO over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
The largest stake in Cavco Industries, Inc. (NASDAQ:CVCO) was held by GAMCO Investors, which reported holding $38.5 million worth of stock at the end of September. It was followed by Broad Bay Capital with a $31.2 million position. Other investors bullish on the company included Renaissance Technologies, Fisher Asset Management, and Royce & Associates. In terms of the portfolio weights assigned to each position Broad Bay Capital allocated the biggest weight to Cavco Industries, Inc. (NASDAQ:CVCO), around 8.57% of its 13F portfolio. Tontine Asset Management is also relatively very bullish on the stock, earmarking 0.7 percent of its 13F equity portfolio to CVCO.
Since Cavco Industries, Inc. (NASDAQ:CVCO) has experienced declining sentiment from hedge fund managers, it’s safe to say that there lies a certain “tier” of hedge funds that elected to cut their entire stakes by the end of the first quarter. Intriguingly, Israel Englander’s Millennium Management cut the biggest stake of all the hedgies monitored by Insider Monkey, worth an estimated $6.3 million in stock. Mark McMeans’s fund, Brasada Capital Management, also dropped its stock, about $2.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine 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 Edgewell Personal Care Company (NYSE:EPC), BioTelemetry, Inc. (NASDAQ:BEAT), Office Properties Income Trust (NASDAQ:OPI), and Constellation Pharmaceuticals, Inc. (NASDAQ:CNST). All of these stocks’ market caps resemble CVCO’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $167 million. That figure was $122 million in CVCO’s case. Edgewell Personal Care Company (NYSE:EPC) is the most popular stock in this table. On the other hand Office Properties Income Trust (NASDAQ:OPI) is the least popular one with only 10 bullish hedge fund positions. Cavco Industries, Inc. (NASDAQ:CVCO) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th but still beat the market by 14.8 percentage points. Hedge funds were also right about betting on CVCO as the stock returned 33.7% in Q2 (through June 17th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.