Did Hedge Funds Make The Right Call On CBRE Group, Inc. (CBRE) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of CBRE Group, Inc. (NYSE:CBRE) based on that data and determine whether they were really smart about the stock.

CBRE Group, Inc. (NYSE:CBRE) was in 33 hedge funds’ portfolios at the end of March. CBRE investors should pay attention to an increase in hedge fund interest in recent months. There were 30 hedge funds in our database with CBRE positions at the end of the previous quarter. Our calculations also showed that CBRE 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.

William Von Mueffling - Cantillon Capital Management

William Von Mueffling of Cantillon Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s check out the fresh hedge fund action regarding CBRE Group, Inc. (NYSE:CBRE).

Hedge fund activity in CBRE Group, Inc. (NYSE:CBRE)

At Q1’s end, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CBRE over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Is CBRE A Good Stock To Buy?

More specifically, ValueAct Capital was the largest shareholder of CBRE Group, Inc. (NYSE:CBRE), with a stake worth $385.6 million reported as of the end of September. Trailing ValueAct Capital was Cantillon Capital Management, which amassed a stake valued at $254.2 million. Generation Investment Management, Hosking Partners, and Ariel Investments 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 ValueAct Capital allocated the biggest weight to CBRE Group, Inc. (NYSE:CBRE), around 5.54% of its 13F portfolio. Marlowe Partners is also relatively very bullish on the stock, setting aside 3.4 percent of its 13F equity portfolio to CBRE.

As aggregate interest increased, key hedge funds were leading the bulls’ herd. Renaissance Technologies, created the largest position in CBRE Group, Inc. (NYSE:CBRE). Renaissance Technologies had $9 million invested in the company at the end of the quarter. Martin Whitman’s Third Avenue Management also initiated a $8.9 million position during the quarter. The following funds were also among the new CBRE investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, David Steinberg and Eric Udoff’s Marlowe Partners, and D. E. Shaw’s D E Shaw.

Let’s check out hedge fund activity in other stocks similar to CBRE Group, Inc. (NYSE:CBRE). We will take a look at MarketAxess Holdings Inc. (NASDAQ:MKTX), Ameriprise Financial, Inc. (NYSE:AMP), Aptiv PLC (NYSE:APTV), and Hewlett Packard Enterprise Company (NYSE:HPE). This group of stocks’ market caps are closest to CBRE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MKTX 27 711821 0
AMP 26 605759 -11
APTV 33 679352 -13
HPE 29 641977 -12
Average 28.75 659727 -9

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $660 million. That figure was $1143 million in CBRE’s case. Aptiv PLC (NYSE:APTV) is the most popular stock in this table. On the other hand Ameriprise Financial, Inc. (NYSE:AMP) is the least popular one with only 26 bullish hedge fund positions. CBRE Group, Inc. (NYSE:CBRE) 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately CBRE wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CBRE were disappointed as the stock returned 19.9% 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.