In this article you are going to find out whether hedge funds think Crown Holdings, Inc. (NYSE:CCK) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Crown Holdings, Inc. (NYSE:CCK) worth your attention right now? Investors who are in the know are becoming less confident. The number of bullish hedge fund bets were trimmed by 2 recently. Our calculations also showed that CCK 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). CCK was in 56 hedge funds’ portfolios at the end of the first quarter of 2020. There were 58 hedge funds in our database with CCK holdings at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 44 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Lee Ainslie of Maverick Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“. We interview hedge fund managers and ask them about best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s view the fresh hedge fund action regarding Crown Holdings, Inc. (NYSE:CCK).
How are hedge funds trading Crown Holdings, Inc. (NYSE:CCK)?
At Q1’s end, a total of 56 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CCK over the last 18 quarters. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
More specifically, Lyrical Asset Management was the largest shareholder of Crown Holdings, Inc. (NYSE:CCK), with a stake worth $249.7 million reported as of the end of September. Trailing Lyrical Asset Management was Maverick Capital, which amassed a stake valued at $202.4 million. Rivulet Capital, Southpoint Capital Advisors, and Tensile Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Impactive Capital allocated the biggest weight to Crown Holdings, Inc. (NYSE:CCK), around 13.37% of its 13F portfolio. SAYA Management is also relatively very bullish on the stock, designating 10.04 percent of its 13F equity portfolio to CCK.
Seeing as Crown Holdings, Inc. (NYSE:CCK) has experienced a decline in interest from the smart money, it’s safe to say that there is a sect of money managers that decided to sell off their positions entirely by the end of the third quarter. Intriguingly, Clint Carlson’s Carlson Capital sold off the biggest position of all the hedgies watched by Insider Monkey, valued at close to $32.7 million in stock, and Phill Gross and Robert Atchinson’s Adage Capital Management was right behind this move, as the fund dumped about $28.4 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks similar to Crown Holdings, Inc. (NYSE:CCK). These stocks are Zscaler, Inc. (NASDAQ:ZS), Everest Re Group Ltd (NYSE:RE), MGM Growth Properties LLC (NYSE:MGP), and MongoDB, Inc. (NASDAQ:MDB). This group of stocks’ market valuations are similar to CCK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ZS | 27 | 274887 | 9 |
| RE | 27 | 558232 | 3 |
| MGP | 28 | 546863 | -1 |
| MDB | 30 | 770189 | -2 |
| Average | 28 | 537543 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $538 million. That figure was $1217 million in CCK’s case. MongoDB, Inc. (NASDAQ:MDB) is the most popular stock in this table. On the other hand Zscaler, Inc. (NASDAQ:ZS) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Crown Holdings, Inc. (NYSE:CCK) 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 gained 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. Unfortunately CCK wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CCK were disappointed as the stock returned 7% during the second quarter (through May 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.
