We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards CRH PLC (NYSE:CRH) and determine whether hedge funds skillfully traded this stock.
Is CRH PLC (NYSE:CRH) a bargain? Prominent investors were in a bullish mood. The number of bullish hedge fund bets advanced by 5 lately. Our calculations also showed that CRH 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.
If you’d ask most stock holders, hedge funds are seen as slow, old investment vehicles of yesteryear. While there are greater than 8000 funds with their doors open today, Our researchers look at the upper echelon of this group, about 850 funds. These money managers preside over most of the hedge fund industry’s total capital, and by shadowing their inimitable picks, Insider Monkey has deciphered a number of investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the fresh hedge fund action regarding CRH PLC (NYSE:CRH).
How have hedgies been trading CRH PLC (NYSE:CRH)?
Heading into the second quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 100% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CRH over the last 18 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
The largest stake in CRH PLC (NYSE:CRH) was held by Renaissance Technologies, which reported holding $58 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $33.1 million position. Other investors bullish on the company included GMT Capital, D E Shaw, and Citadel Investment Group. In terms of the portfolio weights assigned to each position GMT Capital allocated the biggest weight to CRH PLC (NYSE:CRH), around 0.71% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, designating 0.09 percent of its 13F equity portfolio to CRH.
Now, specific money managers have jumped into CRH PLC (NYSE:CRH) headfirst. D E Shaw, managed by D. E. Shaw, created the most outsized position in CRH PLC (NYSE:CRH). D E Shaw had $10.5 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $7.6 million investment in the stock during the quarter. The following funds were also among the new CRH investors: Dmitry Balyasny’s Balyasny Asset Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Israel Englander’s Millennium Management.
Let’s now review hedge fund activity in other stocks similar to CRH PLC (NYSE:CRH). We will take a look at TE Connectivity Ltd. (NYSE:TEL), American International Group Inc (NYSE:AIG), Verisign, Inc. (NASDAQ:VRSN), and EOG Resources Inc (NYSE:EOG). This group of stocks’ market valuations match CRH’s market valuation.
|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 40.25 hedge funds with bullish positions and the average amount invested in these stocks was $2325 million. That figure was $132 million in CRH’s case. EOG Resources Inc (NYSE:EOG) is the most popular stock in this table. On the other hand TE Connectivity Ltd. (NYSE:TEL) is the least popular one with only 33 bullish hedge fund positions. Compared to these stocks CRH PLC (NYSE:CRH) is even less popular than TEL. Hedge funds clearly dropped the ball on CRH as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on CRH as the stock returned 27.8% in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.