Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018 as investors first worried over the possible ramifications of rising interest rates and the escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only about 60% S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Crane Co. (NYSE:CR) and see how the stock is affected by the recent hedge fund activity.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a look at the new hedge fund action encompassing Crane Co. (NYSE:CR).
What have hedge funds been doing with Crane Co. (NYSE:CR)?
At the end of the second quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from one quarter earlier. On the other hand, there were a total of 19 hedge funds with a bullish position in CR 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.
The largest stake in Crane Co. (NYSE:CR) was held by GAMCO Investors, which reported holding $169.5 million worth of stock at the end of March. It was followed by AQR Capital Management with a $66.2 million position. Other investors bullish on the company included Citadel Investment Group, Two Sigma Advisors, and Marshall Wace LLP.
As one would reasonably expect, key money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the biggest position in Crane Co. (NYSE:CR). Marshall Wace LLP had $16.6 million invested in the company at the end of the quarter. Gregg Moskowitz’s Interval Partners also made a $3.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Benjamin A. Smith’s Laurion Capital Management, Bruce Kovner’s Caxton Associates LP, and Richard Driehaus’s Driehaus Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Crane Co. (NYSE:CR) but similarly valued. These stocks are Deckers Outdoor Corporation (NYSE:DECK), GW Pharmaceuticals plc (NASDAQ:GWPH), Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), and Ashland Global Holdings Inc. (NYSE:ASH). This group of stocks’ market values are similar to CR’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $739 million. That figure was $366 million in CR’s case. Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) is the most popular stock in this table. On the other hand GW Pharmaceuticals plc (NASDAQ:GWPH) is the least popular one with only 16 bullish hedge fund positions. Crane Co. (NYSE:CR) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CR investors were disappointed as the stock returned -2.4% during the third 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 (view the video below) among hedge funds as many of these stocks already outperformed the market so far in 2019.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.