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Did Hedge Funds Make The Right Call On Corecivic Inc. (CXW)?

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 Corecivic Inc. (NYSE:CXW) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Corecivic Inc. (NYSE:CXW) has seen a decrease in hedge fund sentiment of late. Our calculations also showed that CXW 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.

At the moment there are a large number of indicators shareholders use to size up publicly traded companies. A couple of the less utilized indicators are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the top picks of the best fund managers can outperform the market by a significant margin (see the details here).

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world 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 let’s analyze the fresh hedge fund action encompassing Corecivic Inc. (NYSE:CXW).

How have hedgies been trading Corecivic Inc. (NYSE:CXW)?

At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -28% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CXW over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of Corecivic Inc. (NYSE:CXW), with a stake worth $49.1 million reported as of the end of September. Trailing Renaissance Technologies was Capital Growth Management, which amassed a stake valued at $23.4 million. Arrowstreet Capital, Intrinsic Edge Capital, and Citadel Investment Group 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 Capital Growth Management allocated the biggest weight to Corecivic Inc. (NYSE:CXW), around 3.29% of its 13F portfolio. Hourglass Capital is also relatively very bullish on the stock, earmarking 1.49 percent of its 13F equity portfolio to CXW.

Judging by the fact that Corecivic Inc. (NYSE:CXW) has faced a decline in interest from the smart money, it’s safe to say that there were a few funds who sold off their entire stakes last quarter. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the biggest stake of the 750 funds followed by Insider Monkey, totaling close to $5.3 million in stock, and Cristan Blackman’s Empirical Capital Partners was right behind this move, as the fund cut about $0.8 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 7 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Corecivic Inc. (NYSE:CXW). We will take a look at Main Street Capital Corporation (NYSE:MAIN), Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB), Matson Inc. (NYSE:MATX), and Fresh Del Monte Produce Inc (NYSE:FDP). All of these stocks’ market caps are closest to CXW’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MAIN 7 14571 -2
OMAB 4 29890 -2
MATX 3 6188 -7
FDP 6 28077 -5
Average 5 19682 -4

View table here if you experience formatting issues.

As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $110 million in CXW’s case. Main Street Capital Corporation (NYSE:MAIN) is the most popular stock in this table. On the other hand Matson Inc. (NYSE:MATX) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Corecivic Inc. (NYSE:CXW) 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 18.6% in 2020 through July 27th and still beat the market by 17.1 percentage points. Unfortunately CXW wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CXW were disappointed as the stock returned -20.9% since the end of the first 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.

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