How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding CACI International Inc (NYSE:CACI).
CACI International Inc (NYSE:CACI) investors should be aware of a decrease in activity from the world’s largest hedge funds recently. CACI was in 25 hedge funds’ portfolios at the end of the third quarter of 2019. There were 29 hedge funds in our database with CACI positions at the end of the previous quarter. Our calculations also showed that CACI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Noam Gottesman of GLG Partners
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the key hedge fund action encompassing CACI International Inc (NYSE:CACI).
Hedge fund activity in CACI International Inc (NYSE:CACI)
At the end of the third quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. By comparison, 20 hedge funds held shares or bullish call options in CACI a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of CACI International Inc (NYSE:CACI), with a stake worth $129.6 million reported as of the end of September. Trailing Citadel Investment Group was AQR Capital Management, which amassed a stake valued at $90.8 million. Horizon Asset Management, GLG Partners, and Millennium 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 Horizon Asset Management allocated the biggest weight to CACI International Inc (NYSE:CACI), around 2.66% of its portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, dishing out 1.8 percent of its 13F equity portfolio to CACI.
Due to the fact that CACI International Inc (NYSE:CACI) has experienced bearish sentiment from the aggregate hedge fund industry, we can see that there was a specific group of hedgies that decided to sell off their full holdings heading into Q4. Intriguingly, Matthew Tewksbury’s Stevens Capital Management cut the largest investment of the “upper crust” of funds watched by Insider Monkey, worth an estimated $4.7 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund said goodbye to about $2.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to CACI International Inc (NYSE:CACI). These stocks are Herbalife Nutrition Ltd. (NYSE:HLF), SolarWinds Corporation (NYSE:SWI), Medidata Solutions Inc (NASDAQ:MDSO), and Tata Motors Limited (NYSE:TTM). All of these stocks’ market caps match CACI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HLF | 22 | 2655964 | -5 |
| SWI | 13 | 2504777 | -9 |
| MDSO | 23 | 585095 | -7 |
| TTM | 7 | 93303 | -4 |
| Average | 16.25 | 1459785 | -6.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $1460 million. That figure was $522 million in CACI’s case. Medidata Solutions Inc (NASDAQ:MDSO) is the most popular stock in this table. On the other hand Tata Motors Limited (NYSE:TTM) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks CACI International Inc (NYSE:CACI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CACI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CACI were disappointed as the stock returned 3.5% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
