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Do Hedge Funds Love Cree, Inc. (CREE)?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity 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 March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Cree, Inc. (NASDAQ:CREE) based on those filings.

Is Cree, Inc. (NASDAQ:CREE) a buy, sell, or hold? Prominent investors are in a pessimistic mood. The number of long hedge fund positions decreased by 9 recently. Our calculations also showed that CREE 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.

Glen Kacher of Light Street Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a gander at the recent hedge fund action regarding Cree, Inc. (NASDAQ:CREE).

What have hedge funds been doing with Cree, Inc. (NASDAQ:CREE)?

Heading into the second quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -36% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CREE over the last 18 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Among these funds, Coatue Management held the most valuable stake in Cree, Inc. (NASDAQ:CREE), which was worth $170.8 million at the end of the third quarter. On the second spot was Iridian Asset Management which amassed $55.6 million worth of shares. Light Street Capital, D E Shaw, and Black-and-White 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 Coatue Management allocated the biggest weight to Cree, Inc. (NASDAQ:CREE), around 2.16% of its 13F portfolio. Light Street Capital is also relatively very bullish on the stock, dishing out 1.95 percent of its 13F equity portfolio to CREE.

Judging by the fact that Cree, Inc. (NASDAQ:CREE) has experienced declining sentiment from hedge fund managers, logic holds that there lies a certain “tier” of hedge funds that slashed their entire stakes heading into Q4. At the top of the heap, Renaissance Technologies sold off the largest investment of the “upper crust” of funds monitored by Insider Monkey, worth about $50 million in stock, and Martin Taylor’s Crake Asset Management was right behind this move, as the fund said goodbye to about $8.9 million worth. These moves are important to note, as total hedge fund interest dropped by 9 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Cree, Inc. (NASDAQ:CREE). We will take a look at First Financial Bankshares Inc (NASDAQ:FFIN), Southwest Gas Holdings, Inc. (NYSE:SWX), American Campus Communities, Inc. (NYSE:ACC), and Sealed Air Corporation (NYSE:SEE). This group of stocks’ market caps match CREE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FFIN 14 28294 1
SWX 13 79506 -10
ACC 16 195709 -5
SEE 29 702381 -1
Average 18 251473 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $251 million. That figure was $310 million in CREE’s case. Sealed Air Corporation (NYSE:SEE) is the most popular stock in this table. On the other hand Southwest Gas Holdings, Inc. (NYSE:SWX) is the least popular one with only 13 bullish hedge fund positions. Cree, Inc. (NASDAQ:CREE) is not the least popular stock in this group but hedge fund interest is still below 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 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on CREE as the stock returned 64.7% during the second quarter and outperformed the market by an even larger margin.

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