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Hedge Funds Have Never Been This Bullish On CoStar Group Inc (CSGP)

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of 6 percentage points during the first 5 months of 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in CoStar Group Inc (NASDAQ:CSGP).

CoStar Group Inc (NASDAQ:CSGP) has seen an increase in hedge fund sentiment recently. CSGP was in 32 hedge funds’ portfolios at the end of the first quarter of 2019. There were 23 hedge funds in our database with CSGP holdings at the end of the previous quarter. Our calculations also showed that CSGP isn’t among the 30 most popular stocks among hedge funds.

If you’d ask most investors, hedge funds are viewed as unimportant, old financial vehicles of yesteryear. While there are more than 8000 funds with their doors open at the moment, Our experts choose to focus on the elite of this group, approximately 750 funds. These investment experts control most of the hedge fund industry’s total asset base, and by tailing their first-class investments, Insider Monkey has come up with various investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by around 5 percentage points annually since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.

BlueMountain Capital Management's Returns, AUM and Holdings

Let’s take a glance at the key hedge fund action surrounding CoStar Group Inc (NASDAQ:CSGP).

How are hedge funds trading CoStar Group Inc (NASDAQ:CSGP)?

Heading into the second quarter of 2019, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 39% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CSGP 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.

CSGP_jun2019

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Brian Bares’s Bares Capital Management has the biggest position in CoStar Group Inc (NASDAQ:CSGP), worth close to $257 million, accounting for 7.2% of its total 13F portfolio. The second most bullish fund manager is Select Equity Group, led by Robert Joseph Caruso, holding a $240.6 million position; 1.6% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism encompass Ken Griffin’s Citadel Investment Group, Gabriel Plotkin’s Melvin Capital Management and Leonard A. Potter’s Wildcat Capital Management.

As aggregate interest increased, key money managers have jumped into CoStar Group Inc (NASDAQ:CSGP) headfirst. Melvin Capital Management, managed by Gabriel Plotkin, created the most outsized position in CoStar Group Inc (NASDAQ:CSGP). Melvin Capital Management had $81.6 million invested in the company at the end of the quarter. James Crichton’s Hitchwood Capital Management also initiated a $14 million position during the quarter. The other funds with brand new CSGP positions are Steve Cohen’s Point72 Asset Management, Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital, and Matthew Tewksbury’s Stevens Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as CoStar Group Inc (NASDAQ:CSGP) but similarly valued. We will take a look at Franklin Resources, Inc. (NYSE:BEN), Total System Services, Inc. (NYSE:TSS), CGI Inc. (NYSE:GIB), and MSCI Inc (NYSE:MSCI). This group of stocks’ market caps match CSGP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BEN 28 819583 0
TSS 40 1151114 5
GIB 18 340331 1
MSCI 36 630783 -2
Average 30.5 735453 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $735 million. That figure was $994 million in CSGP’s case. Total System Services, Inc. (NYSE:TSS) is the most popular stock in this table. On the other hand CGI Inc. (NYSE:GIB) is the least popular one with only 18 bullish hedge fund positions. CoStar Group Inc (NASDAQ:CSGP) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on CSGP as the stock returned 10% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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