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 CSW Industrials, Inc. (NASDAQ:CSWI) and determine whether hedge funds skillfully traded this stock.
CSW Industrials, Inc. (NASDAQ:CSWI) was in 19 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 20. CSWI investors should pay attention to an increase in activity from the world’s largest hedge funds lately. There were 16 hedge funds in our database with CSWI holdings at the end of March. Our calculations also showed that CSWI isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind we’re going to take a glance at the new hedge fund action regarding CSW Industrials, Inc. (NASDAQ:CSWI).
What does smart money think about CSW Industrials, Inc. (NASDAQ:CSWI)?
At the end of the second quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CSWI over the last 20 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of CSW Industrials, Inc. (NASDAQ:CSWI), with a stake worth $9.5 million reported as of the end of September. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $2.8 million. AQR Capital Management, Winton Capital Management, and Moerus Capital Management 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 Moerus Capital Management allocated the biggest weight to CSW Industrials, Inc. (NASDAQ:CSWI), around 1.28% of its 13F portfolio. Lyon Street Capital is also relatively very bullish on the stock, earmarking 0.73 percent of its 13F equity portfolio to CSWI.
Consequently, key money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, established the biggest position in CSW Industrials, Inc. (NASDAQ:CSWI). Millennium Management had $0.4 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also initiated a $0.3 million position during the quarter. The only other fund with a brand new CSWI position is Michael Gelband’s ExodusPoint Capital.
Let’s now take a look at hedge fund activity in other stocks similar to CSW Industrials, Inc. (NASDAQ:CSWI). We will take a look at First Busey Corporation (NASDAQ:BUSE), Oric Pharmaceuticals, Inc. (NASDAQ:ORIC), Enanta Pharmaceuticals Inc (NASDAQ:ENTA), Encore Wire Corporation (NASDAQ:WIRE), BrightSphere Investment Group Inc (NYSE:BSIG), Lindsay Corporation (NYSE:LNN), and Avidity Biosciences, Inc. (NASDAQ:RNA). This group of stocks’ market values are similar to CSWI’s market value.
|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 17.3 hedge funds with bullish positions and the average amount invested in these stocks was $191 million. That figure was $29 million in CSWI’s case. Avidity Biosciences, Inc. (NASDAQ:RNA) is the most popular stock in this table. On the other hand Oric Pharmaceuticals, Inc. (NASDAQ:ORIC) is the least popular one with only 11 bullish hedge fund positions. CSW Industrials, Inc. (NASDAQ:CSWI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CSWI is 67.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 24.8% in 2020 through the end of third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on CSWI as the stock returned 12% during Q3 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.