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Hedge Funds Keep Buying Covetrus, Inc. (CVET)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Covetrus, Inc. (NASDAQ:CVET).

Covetrus, Inc. (NASDAQ:CVET) was in 22 hedge funds’ portfolios at the end of the first quarter of 2020. CVET has experienced an increase in hedge fund sentiment lately. There were 20 hedge funds in our database with CVET positions at the end of the previous quarter. Our calculations also showed that CVET 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If you’d ask most stock holders, hedge funds are seen as worthless, outdated investment vehicles of years past. While there are more than 8000 funds in operation at the moment, Our researchers hone in on the masters of this group, about 850 funds. These investment experts command bulk of the hedge fund industry’s total asset base, and by keeping track of their unrivaled investments, Insider Monkey has unearthed numerous investment strategies that have historically outrun the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per 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 .

Lei Zhang Hillhouse Capital

Lei Zhang of Hillhouse Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades 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 let’s take a glance at the recent hedge fund action surrounding Covetrus, Inc. (NASDAQ:CVET).

What does smart money think about Covetrus, Inc. (NASDAQ:CVET)?

At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CVET over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

The largest stake in Covetrus, Inc. (NASDAQ:CVET) was held by Freshford Capital Management, which reported holding $61.5 million worth of stock at the end of September. It was followed by Point72 Asset Management with a $19.5 million position. Other investors bullish on the company included Arlington Value Capital, Two Sigma Advisors, and Viking Global. In terms of the portfolio weights assigned to each position Freshford Capital Management allocated the biggest weight to Covetrus, Inc. (NASDAQ:CVET), around 15.48% of its 13F portfolio. Arlington Value Capital is also relatively very bullish on the stock, dishing out 1.17 percent of its 13F equity portfolio to CVET.

As one would reasonably expect, key money managers were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, initiated the most valuable position in Covetrus, Inc. (NASDAQ:CVET). Point72 Asset Management had $19.5 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $2 million position during the quarter. The other funds with new positions in the stock are Lei Zhang’s Hillhouse Capital Management, Brandon Haley’s Holocene Advisors, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s now take a look at hedge fund activity in other stocks similar to Covetrus, Inc. (NASDAQ:CVET). These stocks are TriCo Bancshares (NASDAQ:TCBK), First Commonwealth Financial Corporation (NYSE:FCF), Enviva Partners, LP (NYSE:EVA), and TiVo Corporation (NASDAQ:TIVO). This group of stocks’ market values are similar to CVET’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TCBK 10 30127 -1
FCF 11 22141 -4
EVA 5 86460 0
TIVO 20 72022 -6
Average 11.5 52688 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $53 million. That figure was $115 million in CVET’s case. TiVo Corporation (NASDAQ:TIVO) is the most popular stock in this table. On the other hand Enviva Partners, LP (NYSE:EVA) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Covetrus, Inc. (NASDAQ:CVET) 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 returned 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on CVET as the stock returned 125.6% so far in Q2 (through June 10th) 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.

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