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Hedge Funds Have Never Been This Bullish On Cboe Global Markets, Inc. (CBOE)

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Cboe Global Markets, Inc. (NASDAQ:CBOE).

Cboe Global Markets, Inc. (NASDAQ:CBOE) shareholders have witnessed an increase in enthusiasm from smart money lately. CBOE was in 38 hedge funds’ portfolios at the end of the first quarter of 2020. There were 27 hedge funds in our database with CBOE holdings at the end of the previous quarter. Our calculations also showed that CBOE 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.

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 51 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.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. 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. With all of this in mind we’re going to take a peek at the latest hedge fund action surrounding Cboe Global Markets, Inc. (NASDAQ:CBOE).

How are hedge funds trading Cboe Global Markets, Inc. (NASDAQ:CBOE)?

At Q1’s end, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of 41% from the fourth quarter of 2019. By comparison, 22 hedge funds held shares or bullish call options in CBOE a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of Cboe Global Markets, Inc. (NASDAQ:CBOE), with a stake worth $392.7 million reported as of the end of September. Trailing Renaissance Technologies was D E Shaw, which amassed a stake valued at $77.7 million. Horizon Asset Management, Carlson Capital, and GLG Partners 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 Truvvo Partners allocated the biggest weight to Cboe Global Markets, Inc. (NASDAQ:CBOE), around 12.4% of its 13F portfolio. Bayberry Capital Partners is also relatively very bullish on the stock, dishing out 3.42 percent of its 13F equity portfolio to CBOE.

As industrywide interest jumped, key money managers were breaking ground themselves. Echo Street Capital Management, managed by Greg Poole, established the most valuable position in Cboe Global Markets, Inc. (NASDAQ:CBOE). Echo Street Capital Management had $17.3 million invested in the company at the end of the quarter. Peter Seuss’s Prana Capital Management also initiated a $11.4 million position during the quarter. The other funds with new positions in the stock are Angela Aldrich’s Bayberry Capital Partners, Ravi Chopra’s Azora Capital, and Ben Gordon’s Blue Grotto Capital.

Let’s also examine hedge fund activity in other stocks similar to Cboe Global Markets, Inc. (NASDAQ:CBOE). We will take a look at Essential Utilities Inc (NYSE:WTRG), Zebra Technologies Corporation (NASDAQ:ZBRA), FactSet Research Systems Inc. (NYSE:FDS), and Synchrony Financial (NYSE:SYF). This group of stocks’ market valuations are closest to CBOE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WTRG 23 518741 2
ZBRA 28 576010 -6
FDS 21 210129 -3
SYF 37 1011642 -7
Average 27.25 579131 -3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $579 million. That figure was $781 million in CBOE’s case. Synchrony Financial (NYSE:SYF) is the most popular stock in this table. On the other hand FactSet Research Systems Inc. (NYSE:FDS) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Cboe Global Markets, Inc. (NASDAQ:CBOE) is more popular among hedge funds. 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 still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on CBOE, though not to the same extent, as the stock returned 19.7% in Q2 (through the end of May) and outperformed the market as well.

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Disclosure: None. This article was originally published at Insider Monkey.