We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Cooper-Standard Holdings Inc (NYSE:CPS) and determine whether hedge funds skillfully traded this stock.
Cooper-Standard Holdings Inc (NYSE:CPS) was in 11 hedge funds’ portfolios at the end of the first quarter of 2020. CPS has experienced a decrease in support from the world’s most elite money managers in recent months. There were 14 hedge funds in our database with CPS holdings at the end of the previous quarter. Our calculations also showed that CPS 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s view the fresh hedge fund action regarding Cooper-Standard Holdings Inc (NYSE:CPS).
What have hedge funds been doing with Cooper-Standard Holdings Inc (NYSE:CPS)?
At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CPS over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Cooper-Standard Holdings Inc (NYSE:CPS) was held by Two Sigma Advisors, which reported holding $3.1 million worth of stock at the end of September. It was followed by Divisar Capital with a $3 million position. Other investors bullish on the company included Arrowstreet Capital, D E Shaw, and 683 Capital Partners. In terms of the portfolio weights assigned to each position Divisar Capital allocated the biggest weight to Cooper-Standard Holdings Inc (NYSE:CPS), around 1.18% of its 13F portfolio. 683 Capital Partners is also relatively very bullish on the stock, designating 0.16 percent of its 13F equity portfolio to CPS.
Since Cooper-Standard Holdings Inc (NYSE:CPS) has experienced falling interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few funds that elected to cut their positions entirely last quarter. It’s worth mentioning that John A. Levin’s Levin Capital Strategies said goodbye to the largest position of all the hedgies monitored by Insider Monkey, valued at about $5.8 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund cut about $3.7 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 3 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Cooper-Standard Holdings Inc (NYSE:CPS). These stocks are Lands’ End, Inc. (NASDAQ:LE), NantHealth, Inc. (NASDAQ:NH), Allegro Merger Corp. (NASDAQ:ALGR), and Green Plains Inc. (NASDAQ:GPRE). All of these stocks’ market caps are closest to CPS’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $13 million in CPS’s case. Green Plains Inc. (NASDAQ:GPRE) is the most popular stock in this table. On the other hand NantHealth, Inc. (NASDAQ:NH) is the least popular one with only 4 bullish hedge fund positions. Cooper-Standard Holdings Inc (NYSE:CPS) 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 CPS as the stock returned 29% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.