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 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded CBRE Group, Inc. (NYSE:CBRE) and determine whether the smart money was really smart about this stock.
CBRE Group, Inc. (NYSE:CBRE) investors should pay attention to a decrease in hedge fund sentiment of late. CBRE Group, Inc. (NYSE:CBRE) was in 29 hedge funds’ portfolios at the end of June. The all time high for this statistics is 34. There were 33 hedge funds in our database with CBRE holdings at the end of March. Our calculations also showed that CBRE isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
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 58 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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a peek at the recent hedge fund action surrounding CBRE Group, Inc. (NYSE:CBRE).
What have hedge funds been doing with CBRE Group, Inc. (NYSE:CBRE)?
At second quarter’s end, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CBRE over the last 20 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, ValueAct Capital, managed by Jeffrey Ubben, holds the number one position in CBRE Group, Inc. (NYSE:CBRE). ValueAct Capital has a $462.6 million position in the stock, comprising 5.3% of its 13F portfolio. The second most bullish fund manager is Generation Investment Management, managed by David Blood and Al Gore, which holds a $381.1 million position; 2.2% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism consist of William von Mueffling’s Cantillon Capital Management, John W. Rogers’s Ariel Investments and Jeremy Hosking’s Hosking Partners. In terms of the portfolio weights assigned to each position ValueAct Capital allocated the biggest weight to CBRE Group, Inc. (NYSE:CBRE), around 5.3% of its 13F portfolio. Cantillon Capital Management is also relatively very bullish on the stock, setting aside 2.67 percent of its 13F equity portfolio to CBRE.
Since CBRE Group, Inc. (NYSE:CBRE) has faced a decline in interest from the smart money, it’s safe to say that there is a sect of fund managers that slashed their full holdings by the end of the second quarter. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the largest investment of all the hedgies watched by Insider Monkey, totaling an estimated $11.9 million in stock, and Robert B. Gillam’s McKinley Capital Management was right behind this move, as the fund cut about $11.2 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 4 funds by the end of the second quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as CBRE Group, Inc. (NYSE:CBRE) but similarly valued. We will take a look at BioNTech SE (NASDAQ:BNTX), The Cooper Companies, Inc. (NYSE:COO), Warner Music Group Corp. (NASDAQ:WMG), Campbell Soup Company (NYSE:CPB), Essex Property Trust Inc (NYSE:ESS), Teladoc Health, Inc (NYSE:TDOC), and Healthpeak Properties, Inc. (NYSE:PEAK). This group of stocks’ market caps are similar to CBRE’s market cap.
|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 29.6 hedge funds with bullish positions and the average amount invested in these stocks was $575 million. That figure was $1443 million in CBRE’s case. Teladoc Health, Inc (NYSE:TDOC) is the most popular stock in this table. On the other hand BioNTech SE (NASDAQ:BNTX) is the least popular one with only 15 bullish hedge fund positions. CBRE Group, Inc. (NYSE:CBRE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CBRE is 50.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 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 23.8% in 2020 through September 14th and surpassed the market by 17.6 percentage points. Unfortunately CBRE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CBRE investors were disappointed as the stock returned 7.9% since Q2 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.