Did Hedge Funds Drop The Ball On Cabot Microelectronics Corporation (CCMP) ?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Cabot Microelectronics Corporation (NASDAQ:CCMP) investors should be aware of a decrease in hedge fund sentiment of late. CCMP was in 13 hedge funds’ portfolios at the end of the second quarter of 2019. There were 17 hedge funds in our database with CCMP holdings at the end of the previous quarter. Our calculations also showed that CCMP isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To most traders, hedge funds are assumed to be slow, old investment tools of the past. While there are over 8000 funds trading at the moment, Our researchers look at the elite of this group, around 750 funds. These investment experts control most of the hedge fund industry’s total capital, and by keeping an eye on their finest investments, Insider Monkey has identified many investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by around 5 percentage points annually since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

Clint Carlson, Carlson Capital

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a peek at the new hedge fund action regarding Cabot Microelectronics Corporation (NASDAQ:CCMP).

How are hedge funds trading Cabot Microelectronics Corporation (NASDAQ:CCMP)?

Heading into the third quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -24% from one quarter earlier. On the other hand, there were a total of 19 hedge funds with a bullish position in CCMP a year ago. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

No of Hedge Funds with CCMP Positions

The largest stake in Cabot Microelectronics Corporation (NASDAQ:CCMP) was held by Renaissance Technologies, which reported holding $102 million worth of stock at the end of March. It was followed by Royce & Associates with a $81.7 million position. Other investors bullish on the company included Adage Capital Management, Carlson Capital, and Citadel Investment Group.

Because Cabot Microelectronics Corporation (NASDAQ:CCMP) has witnessed declining sentiment from hedge fund managers, logic holds that there is a sect of funds that elected to cut their positions entirely by the end of the second quarter. Interestingly, Minhua Zhang’s Weld Capital Management said goodbye to the largest investment of the “upper crust” of funds tracked by Insider Monkey, valued at about $1.2 million in stock, and Ernest Chow and Jonathan Howe’s Sensato Capital Management was right behind this move, as the fund dropped about $0.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds by the end of the second quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Cabot Microelectronics Corporation (NASDAQ:CCMP) but similarly valued. These stocks are Extended Stay America Inc (NASDAQ:STAY), American National Insurance Company (NASDAQ:ANAT), Physicians Realty Trust (NYSE:DOC), and Dicks Sporting Goods Inc (NYSE:DKS). This group of stocks’ market valuations match CCMP’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STAY 28 495473 -4
ANAT 15 69087 6
DOC 12 47665 1
DKS 23 324924 3
Average 19.5 234287 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $234 million. That figure was $294 million in CCMP’s case. Extended Stay America Inc (NASDAQ:STAY) is the most popular stock in this table. On the other hand Physicians Realty Trust (NYSE:DOC) is the least popular one with only 12 bullish hedge fund positions. Cabot Microelectronics Corporation (NASDAQ:CCMP) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on CCMP as the stock returned 28.3% during the same time frame and outperformed the market by an even larger margin.

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