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Cooper-Standard Holdings Inc (CPS): Hedge Fund Sentiment Near All Time Low

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of 4 percentage points during the first 9 months of 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Cooper-Standard Holdings Inc (NYSE:CPS).

Hedge fund interest in Cooper-Standard Holdings Inc (NYSE:CPS) 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 CPS to other stocks including AxoGen, Inc. (NASDAQ:AXGN), Extreme Networks, Inc (NASDAQ:EXTR), and Triumph Bancorp Inc (NASDAQ:TBK) to get a better sense of its popularity.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Levin Levin Capital

In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources  like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Now we’re going to take a look at the key hedge fund action regarding Cooper-Standard Holdings Inc (NYSE:CPS).

How are hedge funds trading Cooper-Standard Holdings Inc (NYSE:CPS)?

At the end of the second quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 18 hedge funds held shares or bullish call options in CPS a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

CPS_nov2019

According to Insider Monkey’s hedge fund database, Levin Capital Strategies, managed by John A. Levin, holds the number one position in Cooper-Standard Holdings Inc (NYSE:CPS). Levin Capital Strategies has a $9.8 million position in the stock, comprising 1% of its 13F portfolio. Coming in second is Millennium Management, managed by Israel Englander, which holds a $6.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions comprise John Overdeck and David Siegel’s Two Sigma Advisors, D. E. Shaw’s D E Shaw and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Judging by the fact that Cooper-Standard Holdings Inc (NYSE:CPS) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of funds who sold off their positions entirely by the end of the second quarter. Interestingly, Minhua Zhang’s Weld Capital Management cut the largest position of the “upper crust” of funds followed by Insider Monkey, worth close to $0.8 million in stock, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital was right behind this move, as the fund sold off about $0.5 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to Cooper-Standard Holdings Inc (NYSE:CPS). These stocks are AxoGen, Inc. (NASDAQ:AXGN), Extreme Networks, Inc (NASDAQ:EXTR), Triumph Bancorp Inc (NASDAQ:TBK), and Northfield Bancorp Inc (NASDAQ:NFBK). This group of stocks’ market caps are closest to CPS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AXGN 15 97856 -4
EXTR 19 99512 -1
TBK 7 45183 2
NFBK 2 34954 -3
Average 10.75 69376 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $69 million. That figure was $42 million in CPS’s case. Extreme Networks, Inc (NASDAQ:EXTR) is the most popular stock in this table. On the other hand Northfield Bancorp Inc (NASDAQ:NFBK) is the least popular one with only 2 bullish hedge fund positions. Cooper-Standard Holdings Inc (NYSE:CPS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CPS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CPS were disappointed as the stock returned -10.8% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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