Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 12 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Global Cord Blood Corporation (NYSE:CO).
Global Cord Blood Corporation (NYSE:CO) has seen an increase in hedge fund interest lately. Our calculations also showed that CO 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the fresh hedge fund action surrounding Global Cord Blood Corporation (NYSE:CO).
What have hedge funds been doing with Global Cord Blood Corporation (NYSE:CO)?
Heading into the fourth quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CO over the last 17 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Global Cord Blood Corporation (NYSE:CO), which was worth $14.6 million at the end of the third quarter. On the second spot was Rock Springs Capital Management which amassed $4.5 million worth of shares. GLG Partners, Oasis Management, 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 Oasis Management allocated the biggest weight to Global Cord Blood Corporation (NYSE:CO), around 2.23% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, dishing out 0.18 percent of its 13F equity portfolio to CO.
As aggregate interest increased, key hedge funds were breaking ground themselves. Paloma Partners, managed by Donald Sussman, established the largest position in Global Cord Blood Corporation (NYSE:CO). Paloma Partners had $0.4 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace also initiated a $0.2 million position during the quarter. The only other fund with a new position in the stock is Matthew Hulsizer’s PEAK6 Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Global Cord Blood Corporation (NYSE:CO) but similarly valued. These stocks are Bridge Bancorp, Inc. (NASDAQ:BDGE), Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT), OneSpan Inc. (NASDAQ:OSPN), and Renewable Energy Group Inc (NASDAQ:REGI). This group of stocks’ market values are closest to CO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BDGE | 10 | 95163 | 0 |
| RCKT | 13 | 137987 | -1 |
| OSPN | 10 | 70375 | 0 |
| REGI | 16 | 89440 | -1 |
| Average | 12.25 | 98241 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $98 million. That figure was $29 million in CO’s case. Renewable Energy Group Inc (NASDAQ:REGI) is the most popular stock in this table. On the other hand Bridge Bancorp, Inc. (NASDAQ:BDGE) is the least popular one with only 10 bullish hedge fund positions. Global Cord Blood Corporation (NYSE:CO) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 CO wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CO investors were disappointed as the stock returned 1.4% 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.
