The third-quarter stock market correction has turned out to resemble the situation observed during the Asian financial crisis of 1997. The two relatively short-lived corrections occurred at a time with stable interest rates, falling commodity markets, with strong-performing technology and healthcare sectors, and struggling energy sector. Similarly, the two corrections followed long periods without a correction, which had to come sooner or later and it did. Even so, several prominent hedge fund investors publicly asserted their bearish view on the current state of the U.S. equity markets, suggesting that they significantly cut their exposure to equities during the latest quarter. Having said that, it would be worthwhile to take a look at the hedge fund sentiment on Cree, Inc. (NASDAQ:CREE) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Hedge fund interest in Cree, Inc. (NASDAQ:CREE) 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 CREE to other stocks, including Univar Inc (NYSE:UNVR), Healthcare Realty Trust Inc (NYSE:HR), and ACI Worldwide Inc (NASDAQ:ACIW) to get a better sense of its popularity.
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In the financial world there are a lot of tools shareholders put to use to value stocks. Two of the most useful tools are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the best money managers can trounce the S&P 500 by a significant margin (see the details here).
Now, let’s review the fresh action surrounding Cree, Inc. (NASDAQ:CREE).
What have hedge funds been doing with Cree, Inc. (NASDAQ:CREE)?
At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the previous quarter. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Mike Masters’ Masters Capital Management has the most valuable call position in Cree, Inc. (NASDAQ:CREE), worth close to $23.8 million, comprising 0.8% of its total 13F portfolio. On Masters Capital Management’s heels is Ken Griffin’s Citadel Investment Group, with an $10.8 million call position; the fund has less than 0.1% of its 13F portfolio invested in the stock.
Judging by the fact that Cree, Inc. (NASDAQ:CREE) has witnessed a declination in interest from hedge fund managers, logic holds that there is a sect of funds that elected to cut their full holdings in the third quarter. At the top of the heap, Josh Resnick’s Jericho Capital Asset Management said goodbye to the largest stake of all the hedgies followed by Insider Monkey, valued at an estimated $16.2 million in stock, and Mike Masters’s Masters Capital Management was right behind this move, as the fund dropped about $10.4 million worth of shares. These transactions are important to note, as total 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 Cree, Inc. (NASDAQ:CREE). We will take a look at Univar Inc (NYSE:UNVR), Healthcare Realty Trust Inc (NYSE:HR), ACI Worldwide Inc (NASDAQ:ACIW), and EnerSys (NYSE:ENS). All of these stocks’ market caps resemble CREE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UNVR | 12 | 172839 | -14 |
| HR | 10 | 54361 | -4 |
| ACIW | 18 | 131514 | 4 |
| ENS | 12 | 74391 | 0 |
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 $108 million, higher than the $72 million in CREE’s case. ACI Worldwide Inc (NASDAQ:ACIW) is the most popular stock in this table. On the other hand Healthcare Realty Trust Inc (NYSE:HR) is the least popular one with only 10 bullish hedge fund positions. Cree, Inc. (NASDAQ:CREE) 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. In this regard ACIW might be a better candidate to consider a long position.
