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Did Hedge Funds Make The Right Call On Cardtronics plc (CATM) ?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Cardtronics plc (NASDAQ:CATM) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Cardtronics plc (NASDAQ:CATM) was in 17 hedge funds’ portfolios at the end of the first quarter of 2020. CATM investors should be aware of a decrease in activity from the world’s largest hedge funds lately. There were 22 hedge funds in our database with CATM positions at the end of the previous quarter. Our calculations also showed that CATM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most market participants, hedge funds are perceived as underperforming, old investment tools of yesteryear. While there are more than 8000 funds with their doors open at present, Our experts look at the elite of this group, approximately 850 funds. These hedge fund managers manage most of the smart money’s total asset base, and by keeping track of their inimitable picks, Insider Monkey has determined many investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we’re going to take a look at the fresh hedge fund action encompassing Cardtronics plc (NASDAQ:CATM).

What does smart money think about Cardtronics plc (NASDAQ:CATM)?

At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CATM over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CATM A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Douglas Braunstein and James Woolery’s Hudson Executive Capital has the most valuable position in Cardtronics plc (NASDAQ:CATM), worth close to $170 million, amounting to 21.5% of its total 13F portfolio. The second most bullish fund manager Renaissance Technologies, with a $30 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers with similar optimism include D. E. Shaw’s D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and David Harding’s Winton Capital Management. In terms of the portfolio weights assigned to each position Hudson Executive Capital allocated the biggest weight to Cardtronics plc (NASDAQ:CATM), around 21.52% of its 13F portfolio. AlphaOne Capital Partners is also relatively very bullish on the stock, setting aside 0.39 percent of its 13F equity portfolio to CATM.

Judging by the fact that Cardtronics plc (NASDAQ:CATM) has faced bearish sentiment from hedge fund managers, it’s safe to say that there was a specific group of money managers that decided to sell off their full holdings heading into Q4. At the top of the heap, Israel Englander’s Millennium Management cut the biggest stake of all the hedgies followed by Insider Monkey, valued at an estimated $7.1 million in stock. Jonathan Lourie and Stuart Fiertz’s fund, Cheyne Capital, also dropped its stock, about $2 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 5 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Cardtronics plc (NASDAQ:CATM) but similarly valued. These stocks are Murphy Oil Corporation (NYSE:MUR), Aimmune Therapeutics Inc (NASDAQ:AIMT), NuStar Energy L.P. (NYSE:NS), and ATN International, Inc. (NASDAQ:ATNI). This group of stocks’ market values are closest to CATM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MUR 20 46262 -4
AIMT 18 138411 5
NS 4 8087 -3
ATNI 8 59085 -1
Average 12.5 62961 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $247 million in CATM’s case. Murphy Oil Corporation (NYSE:MUR) is the most popular stock in this table. On the other hand NuStar Energy L.P. (NYSE:NS) is the least popular one with only 4 bullish hedge fund positions. Cardtronics plc (NASDAQ:CATM) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but beat the market by 17.1 percentage points. Unfortunately CATM wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CATM were disappointed as the stock returned 8.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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