Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. The S&P 500 Index ETF (SPY) lost 2.6% in the first two months of the second quarter. Ten out of 11 industry groups in the S&P 500 Index lost value in May. The average return of a randomly picked stock in the index was even worse (-3.6%). This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 20 most popular S&P 500 stocks among hedge funds not only generated positive returns but also outperformed the index by about 3 percentage points through May 30th. In this article, we will take a look at what hedge funds think about Commercial Vehicle Group, Inc. (NASDAQ:CVGI).
Commercial Vehicle Group, Inc. (NASDAQ:CVGI) has seen an increase in activity from the world’s largest hedge funds recently. CVGI was in 14 hedge funds’ portfolios at the end of the first quarter of 2019. There were 11 hedge funds in our database with CVGI positions at the end of the previous quarter. Our calculations also showed that CVGI isn’t among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 our short portfolio.
Let’s take a glance at the new hedge fund action regarding Commercial Vehicle Group, Inc. (NASDAQ:CVGI).
What have hedge funds been doing with Commercial Vehicle Group, Inc. (NASDAQ:CVGI)?
At Q1’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 27% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in CVGI over the last 15 quarters. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of Commercial Vehicle Group, Inc. (NASDAQ:CVGI), with a stake worth $17.2 million reported as of the end of March. Trailing Royce & Associates was Renaissance Technologies, which amassed a stake valued at $14 million. DC Capital Partners, AQR Capital Management, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
Now, key hedge funds have jumped into Commercial Vehicle Group, Inc. (NASDAQ:CVGI) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most valuable position in Commercial Vehicle Group, Inc. (NASDAQ:CVGI). Arrowstreet Capital had $0.7 million invested in the company at the end of the quarter. Thomas Bailard’s Bailard Inc also made a $0.2 million investment in the stock during the quarter. The only other fund with a new position in the stock is Peter Muller’s PDT Partners.
Let’s also examine hedge fund activity in other stocks similar to Commercial Vehicle Group, Inc. (NASDAQ:CVGI). We will take a look at J. Jill, Inc. (NYSE:JILL), resTORbio, Inc. (NASDAQ:TORC), Clipper Realty Inc. (NYSE:CLPR), and Value Line, Inc. (NASDAQ:VALU). This group of stocks’ market values resemble CVGI’s market value.
|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 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $44 million in CVGI’s case. J. Jill, Inc. (NYSE:JILL) is the most popular stock in this table. On the other hand Value Line, Inc. (NASDAQ:VALU) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Commercial Vehicle Group, Inc. (NASDAQ:CVGI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately CVGI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CVGI were disappointed as the stock returned -4.8% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.