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Hedge Funds Have Never Been More Bullish On Crane Co. (CR)

In this article you are going to find out whether hedge funds think Crane Co. (NYSE:CR) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Crane Co. (NYSE:CR) the right pick for your portfolio? Money managers are turning bullish. The number of long hedge fund bets inched up by 3 recently. Our calculations also showed that CR 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). CR was in 26 hedge funds’ portfolios at the end of the first quarter of 2020. There were 23 hedge funds in our database with CR holdings at the end of the previous quarter.

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.

Mario Gabelli of GAMCO Investors

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 stocks recommended/scorned by legendary Bill Miller. 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. Keeping this in mind let’s take a gander at the recent hedge fund action encompassing Crane Co. (NYSE:CR).

How have hedgies been trading Crane Co. (NYSE:CR)?

At Q1’s end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the previous quarter. On the other hand, there were a total of 22 hedge funds with a bullish position in CR a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Among these funds, GAMCO Investors held the most valuable stake in Crane Co. (NYSE:CR), which was worth $93.9 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $36.9 million worth of shares. Citadel Investment Group, Two Sigma Advisors, and Arrowstreet Capital 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 GAMCO Investors allocated the biggest weight to Crane Co. (NYSE:CR), around 1.11% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, setting aside 0.4 percent of its 13F equity portfolio to CR.

As one would reasonably expect, specific money managers have jumped into Crane Co. (NYSE:CR) headfirst. Adage Capital Management, managed by Phill Gross and Robert Atchinson, established the most valuable position in Crane Co. (NYSE:CR). Adage Capital Management had $6.5 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also made a $3.6 million investment in the stock during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw, Matthew Hulsizer’s PEAK6 Capital Management, and Minhua Zhang’s Weld Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Crane Co. (NYSE:CR) but similarly valued. We will take a look at White Mountains Insurance Group Ltd (NYSE:WTM), Starwood Property Trust, Inc. (NYSE:STWD), Performance Food Group Company (NYSE:PFGC), and Harley-Davidson, Inc. (NYSE:HOG). This group of stocks’ market caps are closest to CR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WTM 16 133496 0
STWD 23 96766 2
PFGC 29 189889 -2
HOG 17 88189 -2
Average 21.25 127085 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $127 million. That figure was $198 million in CR’s case. Performance Food Group Company (NYSE:PFGC) is the most popular stock in this table. On the other hand White Mountains Insurance Group Ltd (NYSE:WTM) is the least popular one with only 16 bullish hedge fund positions. Crane Co. (NYSE:CR) 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 CR wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CR were disappointed as the stock returned 14.1% 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.