Did Hedge Funds Make The Right Call On CBOE Global Markets Inc (CBOE) ?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded CBOE Global Markets Inc (NASDAQ:CBOE) and determine whether the smart money was really smart about this stock.

CBOE Global Markets Inc (NASDAQ:CBOE) has seen an increase in hedge fund sentiment in recent months. Our calculations also showed that CBOE 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


James Dinan of York Capital Management

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. Now let’s review the new hedge fund action regarding CBOE Global Markets Inc (NASDAQ:CBOE).

What have hedge funds been doing with CBOE Global Markets Inc (NASDAQ:CBOE)?

Heading into the second quarter of 2020, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of 41% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CBOE over the last 18 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Is CBOE A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of CBOE Global Markets Inc (NASDAQ:CBOE), with a stake worth $392.7 million reported as of the end of September. Trailing Renaissance Technologies was D E Shaw, which amassed a stake valued at $77.7 million. Horizon Asset Management, Carlson Capital, and GLG Partners 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 Truvvo Partners allocated the biggest weight to CBOE Global Markets Inc (NASDAQ:CBOE), around 12.4% of its 13F portfolio. Bayberry Capital Partners is also relatively very bullish on the stock, designating 3.42 percent of its 13F equity portfolio to CBOE.

As aggregate interest increased, key money managers were breaking ground themselves. Echo Street Capital Management, managed by Greg Poole, established the biggest position in CBOE Global Markets Inc (NASDAQ:CBOE). Echo Street Capital Management had $17.3 million invested in the company at the end of the quarter. Peter Seuss’s Prana Capital Management also made a $11.4 million investment in the stock during the quarter. The following funds were also among the new CBOE investors: Angela Aldrich’s Bayberry Capital Partners, Ravi Chopra’s Azora Capital, and Ben Gordon’s Blue Grotto Capital.

Let’s also examine hedge fund activity in other stocks similar to CBOE Global Markets Inc (NASDAQ:CBOE). We will take a look at Essential Utilities Inc (NYSE:WTRG), Zebra Technologies Corporation (NASDAQ:ZBRA), FactSet Research Systems Inc. (NYSE:FDS), and Synchrony Financial (NYSE:SYF). This group of stocks’ market values are similar to CBOE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WTRG 23 518741 2
ZBRA 28 576010 -6
FDS 21 210129 -3
SYF 37 1011642 -7
Average 27.25 579131 -3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $579 million. That figure was $781 million in CBOE’s case. Synchrony Financial (NYSE:SYF) is the most popular stock in this table. On the other hand FactSet Research Systems Inc. (NYSE:FDS) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks CBOE Global Markets Inc (NASDAQ:CBOE) is more popular among hedge funds. 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 and still beat the market by 15.5 percentage points. Unfortunately CBOE wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CBOE were disappointed as the stock returned 4.9% during the second quarter 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 most of these stocks already outperformed the market in 2020.

Follow Cboe Global Markets Inc. (NASDAQ:CBOE)

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