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Hedge Funds Are Nibbling On CBRE Group, Inc. (CBRE)

In this article we will take a look at whether hedge funds think CBRE Group, Inc. (NYSE:CBRE) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

CBRE Group, Inc. (NYSE:CBRE) was in 33 hedge funds’ portfolios at the end of March. CBRE investors should be aware of an increase in support from the world’s most elite money managers of late. There were 30 hedge funds in our database with CBRE positions at the end of the previous quarter. Our calculations also showed that CBRE 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.

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.

Jeff Ubben VALUEACT CAPITAL

Jeffrey Ubben of ValueAct Capital

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 trades like this one. 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 we’re going to analyze the recent hedge fund action regarding CBRE Group, Inc. (NYSE:CBRE).

What does smart money think about CBRE Group, Inc. (NYSE:CBRE)?

At the end of the first quarter, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CBRE over the last 18 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.

The largest stake in CBRE Group, Inc. (NYSE:CBRE) was held by ValueAct Capital, which reported holding $385.6 million worth of stock at the end of September. It was followed by Cantillon Capital Management with a $254.2 million position. Other investors bullish on the company included Generation Investment Management, Hosking Partners, and Ariel Investments. In terms of the portfolio weights assigned to each position ValueAct Capital allocated the biggest weight to CBRE Group, Inc. (NYSE:CBRE), around 5.54% of its 13F portfolio. Marlowe Partners is also relatively very bullish on the stock, earmarking 3.4 percent of its 13F equity portfolio to CBRE.

As aggregate interest increased, specific money managers have been driving this bullishness. Renaissance Technologies, assembled the largest position in CBRE Group, Inc. (NYSE:CBRE). Renaissance Technologies had $9 million invested in the company at the end of the quarter. Martin Whitman’s Third Avenue Management also made a $8.9 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, David Steinberg and Eric Udoff’s Marlowe Partners, and D. E. Shaw’s D E Shaw.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as CBRE Group, Inc. (NYSE:CBRE) but similarly valued. These stocks are MarketAxess Holdings Inc. (NASDAQ:MKTX), Ameriprise Financial, Inc. (NYSE:AMP), Aptiv PLC (NYSE:APTV), and Hewlett Packard Enterprise Company (NYSE:HPE). This group of stocks’ market valuations are similar to CBRE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MKTX 27 711821 0
AMP 26 605759 -11
APTV 33 679352 -13
HPE 29 641977 -12
Average 28.75 659727 -9

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $660 million. That figure was $1143 million in CBRE’s case. Aptiv PLC (NYSE:APTV) is the most popular stock in this table. On the other hand Ameriprise Financial, Inc. (NYSE:AMP) is the least popular one with only 26 bullish hedge fund positions. CBRE Group, Inc. (NYSE:CBRE) 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 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 but beat the market by 13.2 percentage points. Unfortunately CBRE wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CBRE were disappointed as the stock returned 16.6% during the same time period 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.

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