Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we publish an article with the title “Recession is Imminent: We Need A Travel Ban NOW”. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
Is Crown Holdings, Inc. (NYSE:CCK) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Crown Holdings, Inc. (NYSE:CCK) investors should pay attention to an increase in activity from the world’s largest hedge funds recently. CCK was in 58 hedge funds’ portfolios at the end of December. There were 42 hedge funds in our database with CCK positions at the end of the previous quarter. Our calculations also showed that CCK isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to 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 41 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.
Lee Ainslie of Maverick Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. With all of this in mind let’s take a gander at the fresh hedge fund action surrounding Crown Holdings, Inc. (NYSE:CCK).
How are hedge funds trading Crown Holdings, Inc. (NYSE:CCK)?
Heading into the first quarter of 2020, a total of 58 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from the previous quarter. On the other hand, there were a total of 35 hedge funds with a bullish position in CCK 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.
When looking at the institutional investors followed by Insider Monkey, Andrew Wellington and Jeff Keswin’s Lyrical Asset Management has the most valuable position in Crown Holdings, Inc. (NYSE:CCK), worth close to $345.8 million, comprising 4.7% of its total 13F portfolio. Coming in second is Maverick Capital, led by Lee Ainslie, holding a $205.3 million position; 3% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism encompass Barry Lebovits and Joshua Kuntz’s Rivulet Capital, Israel Englander’s Millennium Management and Douglas Dossey and Arthur Young’s Tensile Capital. In terms of the portfolio weights assigned to each position SAYA Management allocated the biggest weight to Crown Holdings, Inc. (NYSE:CCK), around 12.92% of its 13F portfolio. Akaris Global Partners is also relatively very bullish on the stock, earmarking 9.56 percent of its 13F equity portfolio to CCK.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Maverick Capital, managed by Lee Ainslie, initiated the most valuable position in Crown Holdings, Inc. (NYSE:CCK). Maverick Capital had $205.3 million invested in the company at the end of the quarter. Clint Carlson’s Carlson Capital also made a $32.7 million investment in the stock during the quarter. The other funds with brand new CCK positions are Jeffrey Hoffner’s Engle Capital, Ed Bosek’s BeaconLight Capital, Renaissance Technologies.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Crown Holdings, Inc. (NYSE:CCK) but similarly valued. These stocks are Henry Schein, Inc. (NASDAQ:HSIC), Mohawk Industries, Inc. (NYSE:MHK), Amdocs Limited (NASDAQ:DOX), and Federal Realty Investment Trust (NYSE:FRT). All of these stocks’ market caps resemble CCK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HSIC | 36 | 1379739 | 12 |
| MHK | 40 | 1437266 | 5 |
| DOX | 26 | 623312 | 0 |
| FRT | 22 | 108682 | -4 |
| Average | 31 | 887250 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $887 million. That figure was $1378 million in CCK’s case. Mohawk Industries, Inc. (NYSE:MHK) is the most popular stock in this table. On the other hand Federal Realty Investment Trust (NYSE:FRT) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Crown Holdings, Inc. (NYSE:CCK) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 12.9% in 2020 through March 9th but still managed to beat the market by 1.9 percentage points. Hedge funds were also right about betting on CCK as the stock returned -11.8% so far in Q1 (through March 9th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
