We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Cornerstone Building Brands, Inc. (NYSE:CNR) and determine whether hedge funds skillfully traded this stock.
Cornerstone Building Brands, Inc. (NYSE:CNR) was in 19 hedge funds’ portfolios at the end of June. The all time high for this statistics is 28. CNR has seen a decrease in support from the world’s most elite money managers in recent months. There were 20 hedge funds in our database with CNR positions at the end of the first quarter. Our calculations also showed that CNR 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.
According to most market participants, hedge funds are seen as slow, old investment vehicles of years past. While there are over 8000 funds trading today, Our researchers hone in on the top tier of this group, about 850 funds. These money managers shepherd most of all hedge funds’ total capital, and by shadowing their finest stock picks, Insider Monkey has formulated a few investment strategies that have historically beaten the market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
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 real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. 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. With all of this in mind we’re going to go over the fresh hedge fund action encompassing Cornerstone Building Brands, Inc. (NYSE:CNR).
How are hedge funds trading Cornerstone Building Brands, Inc. (NYSE:CNR)?
Heading into the third quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in CNR a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Coliseum Capital, managed by Christopher Shackelton and Adam Gray, holds the biggest position in Cornerstone Building Brands, Inc. (NYSE:CNR). Coliseum Capital has a $31.2 million position in the stock, comprising 4.5% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, holding a $11.2 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other peers with similar optimism consist of Tim David’s Guardian Point Capital, Robert Henry Lynch’s Aristeia Capital and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Coliseum Capital allocated the biggest weight to Cornerstone Building Brands, Inc. (NYSE:CNR), around 4.55% of its 13F portfolio. Guardian Point Capital is also relatively very bullish on the stock, dishing out 3.31 percent of its 13F equity portfolio to CNR.
Judging by the fact that Cornerstone Building Brands, Inc. (NYSE:CNR) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedgies that decided to sell off their full holdings last quarter. Intriguingly, David Brown’s Hawk Ridge Management said goodbye to the largest stake of the “upper crust” of funds followed by Insider Monkey, comprising about $2.8 million in stock. Phil Frohlich’s fund, Prescott Group Capital Management, also dropped its stock, about $0.3 million worth. These moves are important to note, as total hedge fund interest dropped by 1 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Cornerstone Building Brands, Inc. (NYSE:CNR). We will take a look at Assembly Biosciences Inc (NASDAQ:ASMB), NetGear, Inc. (NASDAQ:NTGR), Azure Power Global Limited (NYSE:AZRE), SpartanNash Company (NASDAQ:SPTN), Great Western Bancorp Inc (NYSE:GWB), DHT Holdings Inc (NYSE:DHT), and Cellectis SA (NASDAQ:CLLS). This group of stocks’ market caps resemble CNR’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $88 million. That figure was $65 million in CNR’s case. Assembly Biosciences Inc (NASDAQ:ASMB) is the most popular stock in this table. On the other hand Azure Power Global Limited (NYSE:AZRE) is the least popular one with only 3 bullish hedge fund positions. Cornerstone Building Brands, Inc. (NYSE:CNR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CNR is 74.4. 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. 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 third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on CNR as the stock returned 31.7% during Q3 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.