Hedge Funds Are Selling Carriage Services, Inc. (CSV)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 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 March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtCarriage Services, Inc. (NYSE:CSV) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Carriage Services, Inc. (NYSE:CSV) was in 11 hedge funds’ portfolios at the end of March. CSV investors should pay attention to a decrease in enthusiasm from smart money in recent months. There were 12 hedge funds in our database with CSV positions at the end of the previous quarter. Our calculations also showed that CSV 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.

Ken Griffin

Ken Griffin of Citadel Investment Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a peek at the recent hedge fund action regarding Carriage Services, Inc. (NYSE:CSV).

What does smart money think about Carriage Services, Inc. (NYSE:CSV)?

At Q1’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CSV over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CSV A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of Carriage Services, Inc. (NYSE:CSV), with a stake worth $19.7 million reported as of the end of September. Trailing Renaissance Technologies was AREX Capital Management, which amassed a stake valued at $6.8 million. Millennium Management, Arrowstreet Capital, and Citadel Investment Group 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 AREX Capital Management allocated the biggest weight to Carriage Services, Inc. (NYSE:CSV), around 7.91% of its 13F portfolio. Cheyne Capital is also relatively very bullish on the stock, earmarking 0.2 percent of its 13F equity portfolio to CSV.

Because Carriage Services, Inc. (NYSE:CSV) has faced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of fund managers who were dropping their positions entirely last quarter. Interestingly, Michael Gelband’s ExodusPoint Capital said goodbye to the biggest stake of all the hedgies monitored by Insider Monkey, worth close to $0.7 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund dumped about $0.2 million worth. These transactions are important to note, as total hedge fund interest fell by 1 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Carriage Services, Inc. (NYSE:CSV). These stocks are Harpoon Therapeutics, Inc. (NASDAQ:HARP), Telaria, Inc. (NYSE:TLRA), Avid Bioservices, Inc. (NASDAQ:CDMO), and Cars.com Inc. (NYSE:CARS). This group of stocks’ market caps are closest to CSV’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HARP 11 52011 3
TLRA 15 50300 0
CDMO 11 46320 -6
CARS 24 67845 -10
Average 15.25 54119 -3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $39 million in CSV’s case. Cars.com Inc. (NYSE:CARS) is the most popular stock in this table. On the other hand Harpoon Therapeutics, Inc. (NASDAQ:HARP) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Carriage Services, Inc. (NYSE:CSV) is even less popular than HARP. Hedge funds dodged a bullet by taking a bearish stance towards CSV. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but managed to beat the market by 15.5 percentage points. Unfortunately CSV wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); CSV investors were disappointed as the stock returned 12.8% 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 so far in 2020.

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