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Credit Suisse Group AG (CS): Hedge Fund Sentiment Unchanged

Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The one and a half month time period since the end of the third quarter is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by about 4 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Credit Suisse Group AG (NYSE:CS).

Hedge fund interest in Credit Suisse Group AG (NYSE:CS) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as SYSCO Corporation (NYSE:SYY), Applied Materials, Inc. (NASDAQ:AMAT), and JD.Com Inc (NASDAQ:JD) to gather more data points.

Why do we pay any attention at all to hedge fund sentiment? 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 market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

RENAISSANCE TECHNOLOGIES

We’re going to check out the latest hedge fund action surrounding Credit Suisse Group AG (NYSE:CS).

What does the smart money think about Credit Suisse Group AG (NYSE:CS)?

At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, no change from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards CS over the last 13 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

No of Hedge Funds CS Positions

More specifically, Renaissance Technologies was the largest shareholder of Credit Suisse Group AG (NYSE:CS), with a stake worth $67.5 million reported as of the end of September. Trailing Renaissance Technologies was Masters Capital Management, which amassed a stake valued at $44.8 million. Masters Capital Management, Fisher Asset Management, and Orbis Investment Management were also very fond of the stock, giving the stock large weights in their portfolios.

Due to the fact that Credit Suisse Group AG (NYSE:CS) has experienced declining sentiment from the smart money, logic holds that there was a specific group of hedgies who were dropping their full holdings heading into Q3. It’s worth mentioning that Israel Englander’s Millennium Management dumped the largest investment of all the hedgies watched by Insider Monkey, comprising close to $18.1 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also said goodbye to its stock, about $0.5 million worth. These bearish behaviors are interesting, 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 similar to Credit Suisse Group AG (NYSE:CS). These stocks are SYSCO Corporation (NYSE:SYY), Applied Materials, Inc. (NASDAQ:AMAT), JD.Com Inc (NASDAQ:JD), and BB&T Corporation (NYSE:BBT). All of these stocks’ market caps are similar to CS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SYY 31 3821036 11
AMAT 43 1985227 -2
JD 32 2971575 -9
BBT 20 118410 -1
Average 31.5 2224062 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.5 hedge funds with bullish positions and the average amount invested in these stocks was $2.22 billion. That figure was $126 million in CS’s case. Applied Materials, Inc. (NASDAQ:AMAT) is the most popular stock in this table. On the other hand BB&T Corporation (NYSE:BBT) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Credit Suisse Group AG (NYSE:CS) is even less popular than BBT. 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.

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

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