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Do Hedge Funds Love Cboe Global Markets, Inc. (CBOE)?

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 of 2018 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETFs by nearly 10 percentage points during the first 11 months of 2019. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Cboe Global Markets, Inc. (NASDAQ:CBOE) from the perspective of those elite funds.

Cboe Global Markets, Inc. (NASDAQ:CBOE) investors should be aware of a decrease in enthusiasm from smart money lately. Our calculations also showed that CBOE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.

Jeffrey Talpins of Element Capital

Jeffrey Talpins of Element Capital

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the latest hedge fund action regarding Cboe Global Markets, Inc. (NASDAQ:CBOE).

Hedge fund activity in Cboe Global Markets, Inc. (NASDAQ:CBOE)

At the end of the third quarter, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the second quarter of 2019. On the other hand, there were a total of 21 hedge funds with a bullish position in CBOE a year ago. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

CBOE_dec2019

The largest stake in Cboe Global Markets, Inc. (NASDAQ:CBOE) was held by Renaissance Technologies, which reported holding $531.6 million worth of stock at the end of September. It was followed by D E Shaw with a $130.8 million position. Other investors bullish on the company included York Capital Management, Horizon Asset Management, and Millennium Management. In terms of the portfolio weights assigned to each position York Capital Management allocated the biggest weight to Cboe Global Markets, Inc. (NASDAQ:CBOE), around 5.88% of its 13F portfolio. Horizon Asset Management is also relatively very bullish on the stock, dishing out 2.21 percent of its 13F equity portfolio to CBOE.

Since Cboe Global Markets, Inc. (NASDAQ:CBOE) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of hedge funds that slashed their full holdings last quarter. At the top of the heap, Doug Silverman and Alexander Klabin’s Senator Investment Group sold off the largest position of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $155.4 million in stock. Keith Meister’s fund, Corvex Capital, also dropped its stock, about $24.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Cboe Global Markets, Inc. (NASDAQ:CBOE). We will take a look at Agnico Eagle Mines Limited (NYSE:AEM), Annaly Capital Management, Inc. (NYSE:NLY), Alliant Energy Corporation (NASDAQ:LNT), and Sea Limited (NYSE:SE). All of these stocks’ market caps are similar to CBOE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AEM 30 382337 4
NLY 15 97109 -6
LNT 21 704846 -5
SE 64 3339840 4
Average 32.5 1131033 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $1131 million. That figure was $1076 million in CBOE’s case. Sea Limited (NYSE:SE) is the most popular stock in this table. On the other hand Annaly Capital Management, Inc. (NYSE:NLY) is the least popular one with only 15 bullish hedge fund positions. Cboe Global Markets, Inc. (NASDAQ:CBOE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CBOE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CBOE investors were disappointed as the stock returned 3.8% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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

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