Do Hedge Funds Love Cardtronics plc (CATM)?

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 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Cardtronics plc (NASDAQ:CATM) and determine whether the smart money was really smart about this stock.

Cardtronics plc (NASDAQ:CATM) investors should pay attention to an increase in support from the world’s most elite money managers lately. Cardtronics plc (NASDAQ:CATM) was in 21 hedge funds’ portfolios at the end of June. The all time high for this statistics is 22. Our calculations also showed that CATM isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Ian Wace Marshall Wace

Ian Wace of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind let’s take a look at the key hedge fund action regarding Cardtronics plc (NASDAQ:CATM).

Hedge fund activity in Cardtronics plc (NASDAQ:CATM)

Heading into the third quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 24% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in CATM a year ago. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

The largest stake in Cardtronics plc (NASDAQ:CATM) was held by Hudson Executive Capital, which reported holding $207.3 million worth of stock at the end of September. It was followed by D E Shaw with a $27.6 million position. Other investors bullish on the company included Renaissance Technologies, Arrowstreet Capital, and Intrinsic Edge Capital. In terms of the portfolio weights assigned to each position Hudson Executive Capital allocated the biggest weight to Cardtronics plc (NASDAQ:CATM), around 20.23% of its 13F portfolio. Shannon River Fund Management is also relatively very bullish on the stock, setting aside 1.27 percent of its 13F equity portfolio to CATM.

Consequently, key money managers were leading the bulls’ herd. Intrinsic Edge Capital, managed by Mark Coe, initiated the largest position in Cardtronics plc (NASDAQ:CATM). Intrinsic Edge Capital had $13.6 million invested in the company at the end of the quarter. Spencer M. Waxman’s Shannon River Fund Management also initiated a $9.7 million position during the quarter. The other funds with new positions in the stock are Peter S. Park’s Park West Asset Management, Israel Englander’s Millennium Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s also examine hedge fund activity in other stocks similar to Cardtronics plc (NASDAQ:CATM). We will take a look at Phreesia, Inc. (NYSE:PHR), Harsco Corporation (NYSE:HSC), Eagle Bancorp, Inc. (NASDAQ:EGBN), Phibro Animal Health Corp (NASDAQ:PAHC), Simulations Plus, Inc. (NASDAQ:SLP), Xenia Hotels & Resorts Inc (NYSE:XHR), and Constellium SE (NYSE:CSTM). All of these stocks’ market caps resemble CATM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PHR 20 106296 12
HSC 15 106780 -1
EGBN 15 15854 3
PAHC 15 50304 -1
SLP 9 39513 -1
XHR 10 17258 2
CSTM 32 192966 -2
Average 16.6 75567 1.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.6 hedge funds with bullish positions and the average amount invested in these stocks was $76 million. That figure was $325 million in CATM’s case. Constellium SE (NYSE:CSTM) is the most popular stock in this table. On the other hand Simulations Plus, Inc. (NASDAQ:SLP) is the least popular one with only 9 bullish hedge fund positions. Cardtronics plc (NASDAQ:CATM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CATM is 63.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately CATM wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CATM were disappointed as the stock returned -17.4% in Q3 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.