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Did Hedge Funds Make The Right Call On Crane Co. (CR) ?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Crane Co. (NYSE:CR) and determine whether hedge funds had an edge regarding this stock.

Crane Co. (NYSE:CR) has seen an increase in hedge fund sentiment of late. Our calculations also showed that CR 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 large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Mario Gabelli of GAMCO Investors

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 check out the fresh hedge fund action regarding Crane Co. (NYSE:CR).

Hedge fund activity in Crane Co. (NYSE:CR)

At Q1’s end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the fourth quarter of 2019. By comparison, 22 hedge funds held shares or bullish call options in CR a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

The largest stake in Crane Co. (NYSE:CR) was held by GAMCO Investors, which reported holding $93.9 million worth of stock at the end of September. It was followed by AQR Capital Management with a $36.9 million position. Other investors bullish on the company included Citadel Investment Group, Two Sigma Advisors, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position GAMCO Investors allocated the biggest weight to Crane Co. (NYSE:CR), around 1.11% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, earmarking 0.4 percent of its 13F equity portfolio to CR.

As industrywide interest jumped, specific money managers have been driving this bullishness. Adage Capital Management, managed by Phill Gross and Robert Atchinson, initiated the most valuable position in Crane Co. (NYSE:CR). Adage Capital Management had $6.5 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also initiated a $3.6 million position during the quarter. The following funds were also among the new CR investors: D. E. Shaw’s D E Shaw, Matthew Hulsizer’s PEAK6 Capital Management, and Minhua Zhang’s Weld Capital Management.

Let’s go over hedge fund activity in other stocks similar to Crane Co. (NYSE:CR). We will take a look at White Mountains Insurance Group Ltd (NYSE:WTM), Starwood Property Trust, Inc. (NYSE:STWD), Performance Food Group Company (NYSE:PFGC), and Harley-Davidson, Inc. (NYSE:HOG). This group of stocks’ market caps match CR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WTM 16 133496 0
STWD 23 96766 2
PFGC 29 189889 -2
HOG 17 88189 -2
Average 21.25 127085 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $127 million. That figure was $198 million in CR’s case. Performance Food Group Company (NYSE:PFGC) is the most popular stock in this table. On the other hand White Mountains Insurance Group Ltd (NYSE:WTM) is the least popular one with only 16 bullish hedge fund positions. Crane Co. (NYSE:CR) 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 CR, though not to the same extent, as the stock returned 21.8% during the second quarter and outperformed the market as well.

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