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Did Hedge Funds Drop The Ball On Cannae Holdings, Inc. (CNNE) ?

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.

Hedge fund interest in Cannae Holdings, Inc. (NYSE:CNNE) 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 CNNE to other stocks including TPG RE Finance Trust, Inc. (NYSE:TRTX), Berkshire Hills Bancorp, Inc. (NYSE:BHLB), and Casella Waste Systems Inc. (NASDAQ:CWST) to get a better sense of its popularity.

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 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 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.

Christian Leone Luxor Capital

Let’s go over the key hedge fund action regarding Cannae Holdings, Inc. (NYSE:CNNE).

What have hedge funds been doing with Cannae Holdings, Inc. (NYSE:CNNE)?

At the end of the fourth quarter, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CNNE over the last 14 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

CNNE_apr2019

More specifically, Nitorum Capital was the largest shareholder of Cannae Holdings, Inc. (NYSE:CNNE), with a stake worth $64 million reported as of the end of December. Trailing Nitorum Capital was Ancora Advisors, which amassed a stake valued at $17.6 million. Governors Lane, Lomas Capital Management, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.

Because Cannae Holdings, Inc. (NYSE:CNNE) has witnessed a decline in interest from the smart money, it’s easy to see that there is a sect of hedgies that slashed their positions entirely last quarter. It’s worth mentioning that Steve Cohen’s Point72 Asset Management said goodbye to the biggest stake of the 700 funds monitored by Insider Monkey, totaling an estimated $4.7 million in stock, and Peter Seuss’s Prana Capital Management was right behind this move, as the fund cut about $2.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Cannae Holdings, Inc. (NYSE:CNNE) but similarly valued. These stocks are TPG RE Finance Trust, Inc. (NYSE:TRTX), Berkshire Hills Bancorp, Inc. (NYSE:BHLB), Casella Waste Systems Inc. (NASDAQ:CWST), and ICF International Inc (NASDAQ:ICFI). This group of stocks’ market valuations match CNNE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TRTX 9 27112 -1
BHLB 11 32334 3
CWST 18 149744 2
ICFI 17 35802 1
Average 13.75 61248 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $180 million in CNNE’s case. Casella Waste Systems Inc. (NASDAQ:CWST) is the most popular stock in this table. On the other hand TPG RE Finance Trust, Inc. (NYSE:TRTX) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Cannae Holdings, Inc. (NYSE:CNNE) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on CNNE as the stock returned 46.5% and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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