We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Cornerstone Building Brands, Inc. (NYSE:CNR) based on that data.
Is Cornerstone Building Brands, Inc. (NYSE:CNR) a healthy stock for your portfolio? The smart money is reducing their bets on the stock. The number of long hedge fund positions dropped by 6 recently. Our calculations also showed that CNR 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.
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 S&P 500 ETFs by 58 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 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.
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 take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. 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. Now let’s take a look at the latest hedge fund action surrounding Cornerstone Building Brands, Inc. (NYSE:CNR).
How are hedge funds trading Cornerstone Building Brands, Inc. (NYSE:CNR)?
At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the fourth quarter of 2019. On the other hand, there were a total of 17 hedge funds with a bullish position in CNR a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, Coliseum Capital was the largest shareholder of Cornerstone Building Brands, Inc. (NYSE:CNR), with a stake worth $25.6 million reported as of the end of September. Trailing Coliseum Capital was Renaissance Technologies, which amassed a stake valued at $9.3 million. Guardian Point Capital, Hawk Ridge Management, and D E Shaw 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 Coliseum Capital allocated the biggest weight to Cornerstone Building Brands, Inc. (NYSE:CNR), around 6.94% of its 13F portfolio. Guardian Point Capital is also relatively very bullish on the stock, designating 3.4 percent of its 13F equity portfolio to CNR.
Seeing as Cornerstone Building Brands, Inc. (NYSE:CNR) has witnessed a decline in interest from the smart money, logic holds that there were a few fund managers that decided to sell off their entire stakes by the end of the first quarter. Intriguingly, Jerome L. Simon’s Lonestar Capital Management said goodbye to the largest investment of the “upper crust” of funds followed by Insider Monkey, worth about $10.6 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also dropped its stock, about $2.2 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 6 funds by the end of the first quarter.
Let’s go over hedge fund activity in other stocks similar to Cornerstone Building Brands, Inc. (NYSE:CNR). We will take a look at OFG Bancorp (NYSE:OFG), Archrock, Inc. (NYSE:AROC), Blucora Inc (NASDAQ:BCOR), and Genfit SA (NASDAQ:GNFT). This group of stocks’ market values match CNR’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 11 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $54 million in CNR’s case. Blucora Inc (NASDAQ:BCOR) is the most popular stock in this table. On the other hand Genfit SA (NASDAQ:GNFT) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Cornerstone Building Brands, Inc. (NYSE:CNR) is more popular among hedge funds. 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 returned 12.2% in 2020 through June 17th but still managed to beat the market by 14.8 percentage points. Hedge funds were also right about betting on CNR as the stock returned 33.6% so far in Q2 (through June 17th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.