Do Hedge Funds Love Copart, Inc. (CPRT)?

“Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital, and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value,” are the words of Maran Capital’s Dan Roller. His stock picks have been beating the S&P 500 Index handily. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Copart, Inc. (NASDAQ:CPRT) and see how it was affected.

Copart, Inc. (NASDAQ:CPRT) has experienced an increase in enthusiasm from smart money recently. Our calculations also showed that CPRT isn’t among the 30 most popular stocks among hedge funds.

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 market by 18 percentage points since May 2014 through December 3, 2018 (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.


Cliff Asness of AQR Capital Management

We’re going to check out the latest hedge fund action regarding Copart, Inc. (NASDAQ:CPRT).

Hedge fund activity in Copart, Inc. (NASDAQ:CPRT)

At the end of the third quarter, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from one quarter earlier. By comparison, 29 hedge funds held shares or bullish call options in CPRT heading into this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


More specifically, Arrowstreet Capital was the largest shareholder of Copart, Inc. (NASDAQ:CPRT), with a stake worth $47.1 million reported as of the end of September. Trailing Arrowstreet Capital was Echo Street Capital Management, which amassed a stake valued at $31.8 million. AQR Capital Management, Royce & Associates, and Nitorum Capital were also very fond of the stock, giving the stock large weights in their portfolios.

Consequently, specific money managers have jumped into Copart, Inc. (NASDAQ:CPRT) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the largest position in Copart, Inc. (NASDAQ:CPRT). Arrowstreet Capital had $47.1 million invested in the company at the end of the quarter. Jesse Ro’s Tiger Legatus Capital also initiated a $9.8 million position during the quarter. The following funds were also among the new CPRT investors: Jonathan Lourie and Stuart Fiertz’s Cheyne Capital, George Hall’s Clinton Group, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Copart, Inc. (NASDAQ:CPRT) but similarly valued. These stocks are InterContinental Hotels Group PLC (NYSE:IHG), DaVita Inc (NYSE:DVA), CenterPoint Energy, Inc. (NYSE:CNP), and Invitation Homes Inc. (NYSE:INVH). This group of stocks’ market values match CPRT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IHG 3 21513 -2
DVA 42 4001510 8
CNP 38 1349001 17
INVH 15 250887 5
Average 24.5 1405728 7

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $1.41 billion. That figure was $248 million in CPRT’s case. DaVita Inc (NYSE:DVA) is the most popular stock in this table. On the other hand InterContinental Hotels Group PLC (NYSE:IHG) is the least popular one with only 3 bullish hedge fund positions. Copart, Inc. (NASDAQ:CPRT) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard DVA might be a better candidate to consider a long position.

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