The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Cavco Industries, Inc. (NASDAQ:CVCO) and determine whether the smart money was really smart about this stock.
Cavco Industries, Inc. (NASDAQ:CVCO) has experienced an increase in activity from the world’s largest hedge funds lately. Cavco Industries, Inc. (NASDAQ:CVCO) was in 23 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 22. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 20 hedge funds in our database with CVCO positions at the end of the first quarter. Our calculations also showed that CVCO 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.
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 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 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.
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 precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. 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. Keeping this in mind let’s take a look at the latest hedge fund action encompassing Cavco Industries, Inc. (NASDAQ:CVCO).
Hedge fund activity in Cavco Industries, Inc. (NASDAQ:CVCO)
At the end of the second quarter, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CVCO over the last 20 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, GAMCO Investors held the most valuable stake in Cavco Industries, Inc. (NASDAQ:CVCO), which was worth $48.3 million at the end of the third quarter. On the second spot was Broad Bay Capital which amassed $44.9 million worth of shares. Renaissance Technologies, Royce & Associates, and Fisher Asset 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 Broad Bay Capital allocated the biggest weight to Cavco Industries, Inc. (NASDAQ:CVCO), around 8.03% of its 13F portfolio. SG Capital Management is also relatively very bullish on the stock, dishing out 2.02 percent of its 13F equity portfolio to CVCO.
Now, key hedge funds have been driving this bullishness. SG Capital Management, managed by Ken Grossman and Glen Schneider, created the largest position in Cavco Industries, Inc. (NASDAQ:CVCO). SG Capital Management had $10.9 million invested in the company at the end of the quarter. John Osterweis’s Osterweis Capital Management also made a $2.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Peter Muller’s PDT Partners, and Donald Sussman’s Paloma Partners.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Cavco Industries, Inc. (NASDAQ:CVCO) but similarly valued. We will take a look at AMTD International Inc. (NYSE:HKIB), PRA Group, Inc. (NASDAQ:PRAA), Dana Incorporated (NYSE:DAN), Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA), Sunstone Hotel Investors Inc (NYSE:SHO), WESCO International, Inc. (NYSE:WCC), and Euronav NV (NYSE:EURN). This group of stocks’ market values match CVCO’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 16.6 hedge funds with bullish positions and the average amount invested in these stocks was $154 million. That figure was $171 million in CVCO’s case. WESCO International, Inc. (NYSE:WCC) is the most popular stock in this table. On the other hand AMTD International Inc. (NYSE:HKIB) is the least popular one with only 1 bullish hedge fund positions. Cavco Industries, Inc. (NASDAQ:CVCO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CVCO is 71.3. 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. 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 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 September and beat the market by 19.3 percentage points. Unfortunately CVCO wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CVCO were disappointed as the stock returned -6.5% in Q3 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.