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Hedge Funds Are Dumping Capital Senior Living Corporation (CSU)

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the third quarter. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Capital Senior Living Corporation (NYSE:CSU).

Is Capital Senior Living Corporation (NYSE:CSU) a first-rate investment now? Investors who are in the know are selling. The number of bullish hedge fund positions were trimmed by 4 recently. Our calculations also showed that CSU isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.

Jeffrey Bronchick - Cove Street Capital

Jeffrey Bronchick of Cove 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. 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. We’re going to take a peek at the fresh hedge fund action surrounding Capital Senior Living Corporation (NYSE:CSU).

How have hedgies been trading Capital Senior Living Corporation (NYSE:CSU)?

At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in CSU over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CSU A Good Stock To Buy?

The largest stake in Capital Senior Living Corporation (NYSE:CSU) was held by Arbiter Partners Capital Management, which reported holding $19.9 million worth of stock at the end of September. It was followed by Cove Street Capital with a $16.1 million position. Other investors bullish on the company included Coliseum Capital, Renaissance Technologies, and Levin Capital Strategies. In terms of the portfolio weights assigned to each position Arbiter Partners Capital Management allocated the biggest weight to Capital Senior Living Corporation (NYSE:CSU), around 3.62% of its 13F portfolio. Coliseum Capital is also relatively very bullish on the stock, designating 2.39 percent of its 13F equity portfolio to CSU.

Seeing as Capital Senior Living Corporation (NYSE:CSU) has witnessed a decline in interest from the smart money, we can see that there lies a certain “tier” of hedge funds that slashed their full holdings last quarter. Intriguingly, Donald Sussman’s Paloma Partners sold off the biggest investment of the “upper crust” of funds tracked by Insider Monkey, valued at about $0.3 million in stock, and Andrew Weiss’s Weiss Asset Management was right behind this move, as the fund dropped about $0.2 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 4 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Capital Senior Living Corporation (NYSE:CSU) but similarly valued. These stocks are Acorda Therapeutics Inc (NASDAQ:ACOR), Red Violet, Inc. (NASDAQ:RDVT), Ultralife Corp. (NASDAQ:ULBI), and Universal Stainless & Alloy Products (NASDAQ:USAP). This group of stocks’ market valuations resemble CSU’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ACOR 15 41326 -1
RDVT 2 2375 1
ULBI 3 3515 -1
USAP 6 26056 -2
Average 6.5 18318 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $52 million in CSU’s case. Acorda Therapeutics Inc (NASDAQ:ACOR) is the most popular stock in this table. On the other hand Red Violet, Inc. (NASDAQ:RDVT) is the least popular one with only 2 bullish hedge fund positions. Capital Senior Living Corporation (NYSE:CSU) 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. 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. Unfortunately CSU wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CSU were disappointed as the stock returned -12.8% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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