We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Costamare Inc (NYSE:CMRE).
Costamare Inc (NYSE:CMRE) was in 11 hedge funds’ portfolios at the end of September. CMRE shareholders have witnessed an increase in hedge fund interest of late. There were 10 hedge funds in our database with CMRE holdings at the end of the previous quarter. Our calculations also showed that CMRE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Jim Simons of Renaissance Technologies
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. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s view the latest hedge fund action encompassing Costamare Inc (NYSE:CMRE).
How have hedgies been trading Costamare Inc (NYSE:CMRE)?
Heading into the fourth quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the second quarter of 2019. On the other hand, there were a total of 8 hedge funds with a bullish position in CMRE a year ago. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Costamare Inc (NYSE:CMRE), which was worth $15.2 million at the end of the third quarter. On the second spot was Millennium Management which amassed $5 million worth of shares. Horizon Asset Management, Arrowstreet Capital, and Marshall Wace 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 Algert Coldiron Investors allocated the biggest weight to Costamare Inc (NYSE:CMRE), around 0.1% of its 13F portfolio. Horizon Asset Management is also relatively very bullish on the stock, designating 0.05 percent of its 13F equity portfolio to CMRE.
As aggregate interest increased, key money managers have jumped into Costamare Inc (NYSE:CMRE) headfirst. AQR Capital Management, managed by Cliff Asness, established the most outsized position in Costamare Inc (NYSE:CMRE). AQR Capital Management had $0.4 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also made a $0.3 million investment in the stock during the quarter. The other funds with brand new CMRE positions are Peter Algert and Kevin Coldiron’s Algert Coldiron Investors and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s also examine hedge fund activity in other stocks similar to Costamare Inc (NYSE:CMRE). These stocks are Target Hospitality Corp. (NASDAQ:TH), Endo International plc (NASDAQ:ENDP), AdvanSix Inc. (NYSE:ASIX), and Kimball International Inc (NASDAQ:KBAL). This group of stocks’ market values are similar to CMRE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TH | 20 | 63509 | 3 |
| ENDP | 19 | 208550 | -2 |
| ASIX | 10 | 114711 | -5 |
| KBAL | 12 | 123697 | -1 |
| Average | 15.25 | 127617 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $128 million. That figure was $26 million in CMRE’s case. Target Hospitality Corp. (NASDAQ:TH) is the most popular stock in this table. On the other hand AdvanSix Inc. (NYSE:ASIX) is the least popular one with only 10 bullish hedge fund positions. Costamare Inc (NYSE:CMRE) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on CMRE as the stock returned 37.6% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
