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. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about Cabot Microelectronics Corporation (NASDAQ:CCMP)?
Is Cabot Microelectronics Corporation (NASDAQ:CCMP) a bargain? Prominent investors are becoming less confident. The number of bullish hedge fund positions were cut by 8 recently. Our calculations also showed that CCMP 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 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. 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, we take a look at lists like the 10 easiest remote jobs that pay well to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Keeping this in mind let’s review the latest hedge fund action surrounding Cabot Microelectronics Corporation (NASDAQ:CCMP).
How have hedgies been trading Cabot Microelectronics Corporation (NASDAQ:CCMP)?
Heading into the second quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in CCMP a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Chuck Royce’s Royce & Associates has the most valuable position in Cabot Microelectronics Corporation (NASDAQ:CCMP), worth close to $69.3 million, corresponding to 0.9% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, holding a $39.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that hold long positions contain Phill Gross and Robert Atchinson’s Adage Capital Management, Clint Carlson’s Carlson Capital and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Carlson Capital allocated the biggest weight to Cabot Microelectronics Corporation (NASDAQ:CCMP), around 0.97% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.94 percent of its 13F equity portfolio to CCMP.
Judging by the fact that Cabot Microelectronics Corporation (NASDAQ:CCMP) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of hedgies that decided to sell off their full holdings last quarter. At the top of the heap, Robert Joseph Caruso’s Select Equity Group cut the largest stake of all the hedgies followed by Insider Monkey, valued at close to $46.1 million in stock, and Kamyar Khajavi’s MIK Capital was right behind this move, as the fund cut about $10.6 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 8 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Cabot Microelectronics Corporation (NASDAQ:CCMP) but similarly valued. These stocks are The Wendy’s Company (NASDAQ:WEN), DXC Technology Company (NYSE:DXC), Vedanta Ltd (NYSE:VEDL), and Aerojet Rocketdyne Holdings Inc (NYSE:AJRD). This group of stocks’ market values resemble CCMP’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 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $385 million. That figure was $232 million in CCMP’s case. DXC Technology Company (NYSE:DXC) is the most popular stock in this table. On the other hand Vedanta Ltd (NYSE:VEDL) is the least popular one with only 11 bullish hedge fund positions. Cabot Microelectronics Corporation (NASDAQ:CCMP) is not the least popular stock in this group but hedge fund interest is still below average. 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 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on CCMP, though not to the same extent, as the stock returned 20% during the second quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.