The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on June 30th. We at Insider Monkey have made an extensive database of more than 873 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Carvana Co. (NYSE:CVNA) based on those filings.
Carvana Co. (NYSE:CVNA) has experienced a decrease in support from the world’s most elite money managers of late. Carvana Co. (NYSE:CVNA) was in 63 hedge funds’ portfolios at the end of June. The all time high for this statistic is 64. Our calculations also showed that CVNA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 79 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.
Christian Leone of Luxor Capital Group
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s take a look at the recent hedge fund action regarding Carvana Co. (NYSE:CVNA).
Do Hedge Funds Think CVNA Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 63 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -2% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CVNA over the last 24 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Tiger Global Management LLC held the most valuable stake in Carvana Co. (NYSE:CVNA), which was worth $1918.1 million at the end of the second quarter. On the second spot was Spruce House Investment Management which amassed $1196.3 million worth of shares. CAS Investment Partners, D1 Capital Partners, and Lone Pine Capital 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 CAS Investment Partners allocated the biggest weight to Carvana Co. (NYSE:CVNA), around 42.43% of its 13F portfolio. Antipodean Advisors is also relatively very bullish on the stock, dishing out 33.66 percent of its 13F equity portfolio to CVNA.
Due to the fact that Carvana Co. (NYSE:CVNA) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of funds who sold off their full holdings by the end of the second quarter. It’s worth mentioning that Dan Loeb’s Third Point cut the biggest stake of the 750 funds followed by Insider Monkey, totaling about $105 million in stock, and Daniel S. Och’s OZ Management was right behind this move, as the fund said goodbye to about $99.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds by the end of the second quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Carvana Co. (NYSE:CVNA) but similarly valued. We will take a look at ING Groep N.V. (NYSE:ING), UBS Group AG (NYSE:UBS), Relx PLC (NYSE:RELX), Roblox Corporation (NYSE:RBLX), Canadian Pacific Railway Limited (NYSE:CP), Canadian Imperial Bank of Commerce (NYSE:CM), and Dollar General Corp. (NYSE:DG). This group of stocks’ market values resemble CVNA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ING | 9 | 601603 | -1 |
| UBS | 15 | 176356 | -1 |
| RELX | 6 | 58838 | 2 |
| RBLX | 49 | 4914667 | 3 |
| CP | 25 | 6353608 | -8 |
| CM | 15 | 382874 | 1 |
| DG | 45 | 1647046 | -7 |
| Average | 23.4 | 2019285 | -1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.4 hedge funds with bullish positions and the average amount invested in these stocks was $2019 million. That figure was $8905 million in CVNA’s case. Roblox Corporation (NYSE:RBLX) is the most popular stock in this table. On the other hand Relx PLC (NYSE:RELX) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Carvana Co. (NYSE:CVNA) is more popular among hedge funds. Our overall hedge fund sentiment score for CVNA is 83.5. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 25.7% in 2021 through September 27th but still managed to beat the market by 6.2 percentage points. Hedge funds were also right about betting on CVNA as the stock returned 5.7% since the end of June (through 9/27) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Follow Carvana Co. (NYSE:CVNA)
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Disclosure: None. This article was originally published at Insider Monkey.
