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Did Hedge Funds Make The Right Call On Cornerstone Building Brands, Inc. (CNR)?

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 Cornerstone Building Brands, Inc. (NYSE:CNR) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Cornerstone Building Brands, Inc. (NYSE:CNR) investors should pay attention to a decrease in activity from the world’s largest hedge funds of late. Our calculations also showed that CNR 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.

In the financial world there are a multitude of tools investors use to analyze stocks. A duo of the most useful tools are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the best money managers can beat the S&P 500 by a healthy amount (see the details here).

David Brown Hawk Ridge Partners

David Brown of Hawk Ridge Management

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. With all of this in mind let’s take a look at the recent hedge fund action regarding Cornerstone Building Brands, Inc. (NYSE:CNR).

How have hedgies been trading Cornerstone Building Brands, Inc. (NYSE:CNR)?

At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in CNR a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Coliseum Capital held the most valuable stake in Cornerstone Building Brands, Inc. (NYSE:CNR), which was worth $25.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $9.3 million worth of shares. Guardian Point Capital, Hawk Ridge Management, and D E Shaw 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 Coliseum Capital allocated the biggest weight to Cornerstone Building Brands, Inc. (NYSE:CNR), around 6.94% of its 13F portfolio. Guardian Point Capital is also relatively very bullish on the stock, dishing out 3.4 percent of its 13F equity portfolio to CNR.

Seeing as Cornerstone Building Brands, Inc. (NYSE:CNR) has witnessed a decline in interest from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of hedgies who sold off their entire stakes by the end of the first quarter. Interestingly, Jerome L. Simon’s Lonestar Capital Management sold off the largest investment of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $10.6 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund said goodbye to about $2.2 million worth. These moves are important to note, as total hedge fund interest was cut by 6 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks similar to Cornerstone Building Brands, Inc. (NYSE:CNR). We will take a look at OFG Bancorp (NYSE:OFG), Archrock, Inc. (NYSE:AROC), Blucora Inc (NASDAQ:BCOR), and Genfit SA (NASDAQ:GNFT). This group of stocks’ market caps resemble CNR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OFG 12 16250 1
AROC 11 13967 -4
BCOR 19 66622 6
GNFT 2 4694 0
Average 11 25383 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $54 million in CNR’s case. Blucora Inc (NASDAQ:BCOR) is the most popular stock in this table. On the other hand Genfit SA (NASDAQ:GNFT) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Cornerstone Building Brands, Inc. (NYSE:CNR) 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 but still managed to beat the market by 17.1 percentage points. Hedge funds were also right about betting on CNR, though not to the same extent, as the stock returned 31.6% since Q1 and outperformed the market as well.

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