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Hedge Funds Are Dumping Covia Holdings Corporation (CVIA)

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Covia Holdings Corporation (NYSE:CVIA).

Is Covia Holdings Corporation (NYSE:CVIA) a healthy stock for your portfolio? Money managers are becoming less confident. The number of long hedge fund bets decreased by 4 lately. Our calculations also showed that CVIA 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). CVIA was in 4 hedge funds’ portfolios at the end of March. There were 8 hedge funds in our database with CVIA holdings at the end of the previous quarter.

Video: 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 S&P 500 ETFs by more than 51 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. 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.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Keeping this in mind we’re going to review the fresh hedge fund action regarding Covia Holdings Corporation (NYSE:CVIA).

What does smart money think about Covia Holdings Corporation (NYSE:CVIA)?

At Q1’s end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -50% from the fourth quarter of 2019. On the other hand, there were a total of 5 hedge funds with a bullish position in CVIA a year ago. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Is CVIA A Good Stock To Buy?

Of the funds tracked by Insider Monkey, SailingStone Capital Partners, managed by MacKenzie B. Davis and Kenneth L. Settles Jr, holds the number one position in Covia Holdings Corporation (NYSE:CVIA). SailingStone Capital Partners has a $2.6 million position in the stock, comprising 1.5% of its 13F portfolio. On SailingStone Capital Partners’s heels is Renaissance Technologies, which holds a $0.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions include Ken Griffin’s Citadel Investment Group, D. E. Shaw’s D E Shaw and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position SailingStone Capital Partners allocated the biggest weight to Covia Holdings Corporation (NYSE:CVIA), around 1.46% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.0008 percent of its 13F equity portfolio to CVIA.

Judging by the fact that Covia Holdings Corporation (NYSE:CVIA) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there exists a select few hedge funds that elected to cut their entire stakes heading into Q4. Intriguingly, Israel Englander’s Millennium Management said goodbye to the biggest investment of the 750 funds tracked by Insider Monkey, valued at about $1.2 million in stock, and Brian C. Freckmann’s Lyon Street Capital was right behind this move, as the fund cut about $0.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 4 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to Covia Holdings Corporation (NYSE:CVIA). These stocks are Ashford Hospitality Trust, Inc. (NYSE:AHT), Eastman Kodak Co. (NYSE:KODK), Limestone Bancorp, Inc. (NASDAQ:LMST), and Neon Therapeutics, Inc. (NASDAQ:NTGN). This group of stocks’ market caps are similar to CVIA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AHT 7 6489 -2
KODK 6 9987 -1
LMST 3 6198 -1
NTGN 4 5691 1
Average 5 7091 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $3 million in CVIA’s case. Ashford Hospitality Trust, Inc. (NYSE:AHT) is the most popular stock in this table. On the other hand Limestone Bancorp, Inc. (NASDAQ:LMST) is the least popular one with only 3 bullish hedge fund positions. Covia Holdings Corporation (NYSE:CVIA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately CVIA wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CVIA investors were disappointed as the stock returned -12.1% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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

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