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Cheetah Mobile Inc (CMCM): Are Hedge Funds Right About This Stock?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Cheetah Mobile Inc (NYSE:CMCM) based on those filings.

Hedge fund interest in Cheetah Mobile Inc (NYSE:CMCM) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare CMCM to other stocks including Oceaneering International, Inc. (NYSE:OII), Clarus Corporation (NASDAQ:CLAR), and Financial Institutions, Inc. (NASDAQ:FISI) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are dozens of metrics market participants use to grade publicly traded companies. A pair of the most underrated metrics are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the top money managers can outperform their index-focused peers by a healthy margin (see the details here).

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. 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 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 peek at the latest hedge fund action surrounding Cheetah Mobile Inc (NYSE:CMCM).

What have hedge funds been doing with Cheetah Mobile Inc (NYSE:CMCM)?

At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CMCM over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Renaissance Technologies has the number one position in Cheetah Mobile Inc (NYSE:CMCM), worth close to $2.7 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by D E Shaw, led by D. E. Shaw, holding a $1.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish encompass Bruce Kovner’s Caxton Associates LP, Ken Griffin’s Citadel Investment Group and . In terms of the portfolio weights assigned to each position Caxton Associates LP allocated the biggest weight to Cheetah Mobile Inc (NYSE:CMCM), around 0.02% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.0026 percent of its 13F equity portfolio to CMCM.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Cheetah Mobile Inc (NYSE:CMCM) but similarly valued. These stocks are Oceaneering International, Inc. (NYSE:OII), Clarus Corporation (NASDAQ:CLAR), Financial Institutions, Inc. (NASDAQ:FISI), and Craft Brew Alliance Inc (NASDAQ:BREW). This group of stocks’ market valuations are similar to CMCM’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OII 19 29958 -5
CLAR 11 34032 0
FISI 11 23795 0
BREW 11 14971 4
Average 13 25689 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $4 million in CMCM’s case. Oceaneering International, Inc. (NYSE:OII) is the most popular stock in this table. On the other hand Clarus Corporation (NASDAQ:CLAR) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Cheetah Mobile Inc (NYSE:CMCM) is even less popular than CLAR. Hedge funds clearly dropped the ball on CMCM as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on CMCM as the stock returned 31.1% so far in the second quarter and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.