Here Is What Hedge Funds Think of CAE, Inc. (USA) (CAE)

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

CAE, Inc. (USA) (NYSE:CAE) shareholders have witnessed a decrease in the hedge fund interest, as of late. CAE was in 6 hedge funds’ portfolios at the end of the third quarter of 2015. There were six hedge funds in our database with CAE positions at the end of the previous quarter. At the end of this article we will also compare CAE to other stocks including AU Optronics Corp. (ADR) (NYSE:AUO), NorthStar Asset Management Group Inc (NYSE:NSAM), and J.C. Penney Company, Inc. (NYSE:JCP) to get a better sense of its popularity.

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According to most stock holders, hedge funds are viewed as unimportant, old investment vehicles of the past. While there are more than 8000 funds with their doors open today, our researchers choose to focus on the upper echelon of this group, about 700 funds. These investment experts handle most of the smart money’s total asset base, and by keeping an eye on their highest performing equity investments, Insider Monkey has come up with a number of investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points a year for a decade in their back tests.

With all of this in mind, let’s go over the recent action surrounding CAE, Inc. (USA) (NYSE:CAE).

How are hedge funds trading CAE, Inc. (USA) (NYSE:CAE)?

At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Eric Sprott’s Sprott Asset Management has the biggest position in CAE, Inc. (USA) (NYSE:CAE), worth close to $15.1 million, corresponding to 0.9% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies, led by Jim Simons, holding a $3.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers with similar optimism contain Cliff Asness’s AQR Capital Management, John Overdeck and David Siegel’s Two Sigma Advisors and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Because CAE, Inc. (USA) (NYSE:CAE) has faced falling interest from the smart money, it’s safe to say that there lies a certain “tier” of money managers who sold off their full holdings by the end of the third quarter. Intriguingly, D E Shaw dumped the largest stake of all the hedgies followed by Insider Monkey, worth close to $500,000. Alec Litowitz and Ross Laser’s fund, Magnetar Capital unloaded its position heading into the fourth quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as CAE, Inc. (USA) (NYSE:CAE), but similarly valued. We will take a look at AU Optronics Corp. (ADR) (NYSE:AUO), NorthStar Asset Management Group Inc (NYSE:NSAM), J.C. Penney Company, Inc. (NYSE:JCP), and Lithia Motors Inc (NYSE:LAD). This group of stocks’ market valuations resemble CAE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AUO 6 14165 -3
NSAM 56 1373880 -7
JCP 35 423832 4
LAD 23 293597 2

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $526 million. This shows that CAE is not a very popular stock among hedge funds. Moreover, the funds from our database, amassed just $22 million worth of the company’s shares, which significantly below the average. This is not necessarily a bearish signal and a further analysis is required to get a better idea regarding the stock’s profitability. However, it’s better to look into stocks that hedge funds are bullish on, and as you can see in the table above, there are several choices to pick from.