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Did Hedge Funds Make The Right Call On Carnival Corporation (CCL) ?

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 Carnival Corporation (NYSE:CCL) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Is Carnival Corporation (NYSE:CCL) the right investment to pursue these days? Investors who are in the know were in a pessimistic mood. The number of long hedge fund positions dropped by 3 lately. Our calculations also showed that CCL 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If you’d ask most shareholders, hedge funds are viewed as underperforming, outdated financial vehicles of the past. While there are more than 8000 funds in operation at present, Our researchers look at the top tier of this group, around 850 funds. These investment experts control bulk of the smart money’s total asset base, and by watching their matchless stock picks, Insider Monkey has determined numerous investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually 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 .

OMEGA ADVISORS

Leon Cooperman of Omega Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. With all of this in mind we’re going to analyze the recent hedge fund action encompassing Carnival Corporation (NYSE:CCL).

How are hedge funds trading Carnival Corporation (NYSE:CCL)?

Heading into the second quarter of 2020, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CCL over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CCL A Good Stock To Buy?

More specifically, Light Street Capital was the largest shareholder of Carnival Corporation (NYSE:CCL), with a stake worth $25.3 million reported as of the end of September. Trailing Light Street Capital was D E Shaw, which amassed a stake valued at $24.7 million. AQR Capital Management, Citadel Investment Group, and Pzena Investment Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Axel Capital Management allocated the biggest weight to Carnival Corporation (NYSE:CCL), around 3.44% of its 13F portfolio. Broad Peak Investment Holdings is also relatively very bullish on the stock, designating 1.33 percent of its 13F equity portfolio to CCL.

Seeing as Carnival Corporation (NYSE:CCL) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there exists a select few money managers who were dropping their entire stakes by the end of the first quarter. Intriguingly, Greg Poole’s Echo Street Capital Management said goodbye to the biggest stake of all the hedgies monitored by Insider Monkey, valued at close to $89.3 million in stock. Leon Cooperman’s fund, Omega Advisors, also dumped its stock, about $38.3 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 3 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks similar to Carnival Corporation (NYSE:CCL). We will take a look at Qorvo Inc (NASDAQ:QRVO), Varian Medical Systems, Inc. (NYSE:VAR), Suzano S.A. (NYSE:SUZ), and Hologic, Inc. (NASDAQ:HOLX). This group of stocks’ market values resemble CCL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
QRVO 39 1165693 -6
VAR 25 439921 -5
SUZ 3 27219 -1
HOLX 41 866159 0
Average 27 624748 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $625 million. That figure was $146 million in CCL’s case. Hologic, Inc. (NASDAQ:HOLX) is the most popular stock in this table. On the other hand Suzano S.A. (NYSE:SUZ) is the least popular one with only 3 bullish hedge fund positions. Carnival Corporation (NYSE:CCL) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on CCL, though not to the same extent, as the stock returned 24.7% during the second quarter and outperformed the market as well.

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