Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter. Trends reversed 180 degrees during the first quarter amid Powell’s pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the first quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Cass Information Systems, Inc. (NASDAQ:CASS).
Cass Information Systems, Inc. (NASDAQ:CASS) was in 11 hedge funds’ portfolios at the end of the first quarter of 2019. CASS has experienced an increase in hedge fund sentiment lately. There were 8 hedge funds in our database with CASS holdings at the end of the previous quarter. Our calculations also showed that cass isn’t among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
We’re going to check out the key hedge fund action regarding Cass Information Systems, Inc. (NASDAQ:CASS).
How have hedgies been trading Cass Information Systems, Inc. (NASDAQ:CASS)?
Heading into the second quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in CASS over the last 15 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Cass Information Systems, Inc. (NASDAQ:CASS) was held by Arrowstreet Capital, which reported holding $4.8 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $4.1 million position. Other investors bullish on the company included Royce & Associates, Two Sigma Advisors, and Citadel Investment Group.
As one would reasonably expect, specific money managers have jumped into Cass Information Systems, Inc. (NASDAQ:CASS) headfirst. Millennium Management, managed by Israel Englander, assembled the biggest position in Cass Information Systems, Inc. (NASDAQ:CASS). Millennium Management had $0.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $0.3 million position during the quarter. The following funds were also among the new CASS investors: Cliff Asness’s AQR Capital Management, Matthew Hulsizer’s PEAK6 Capital Management, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s go over hedge fund activity in other stocks similar to Cass Information Systems, Inc. (NASDAQ:CASS). These stocks are Rite Aid Corporation (NYSE:RAD), Kimbell Royalty Partners, LP (NYSE:KRP), Green Plains Inc. (NASDAQ:GPRE), and Golden Ocean Group Ltd (NASDAQ:GOGL). This group of stocks’ market caps match CASS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RAD | 9 | 26774 | -4 |
| KRP | 5 | 17118 | -2 |
| GPRE | 18 | 162297 | 4 |
| GOGL | 8 | 126531 | -1 |
| Average | 10 | 83180 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $15 million in CASS’s case. Green Plains Inc. (NASDAQ:GPRE) is the most popular stock in this table. On the other hand Kimbell Royalty Partners, LP (NYSE:KRP) is the least popular one with only 5 bullish hedge fund positions. Cass Information Systems, Inc. (NASDAQ:CASS) 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately CASS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CASS were disappointed as the stock returned -3.4% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
