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Is Cabot Microelectronics Corporation (CCMP) Going to Burn These Hedge Funds?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 5.7% in the 12 months ending October 26 (including dividend payments). Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of June 2018) generated a return of 15.1% during the same 12-month period, with 53% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Cabot Microelectronics Corporation (NASDAQ:CCMP).

Hedge fund interest in Cabot Microelectronics Corporation (NASDAQ:CCMP) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare CCMP to other stocks including Dycom Industries, Inc. (NYSE:DY), Acceleron Pharma Inc (NASDAQ:XLRN), and Nextera Energy Partners LP (NYSE:NEP) to get a better sense of its popularity.

In the financial world there are several tools stock market investors can use to grade publicly traded companies. A pair of the less utilized tools are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the top investment managers can beat the S&P 500 by a healthy amount (see the details here).

Phill Gross, Adage Capital Management

We’re going to review the key hedge fund action surrounding Cabot Microelectronics Corporation (NASDAQ:CCMP).

How have hedgies been trading Cabot Microelectronics Corporation (NASDAQ:CCMP)?

Heading into the fourth quarter of 2018, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, no change from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CCMP over the last 13 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

CCMP_dec2018

The largest stake in Cabot Microelectronics Corporation (NASDAQ:CCMP) was held by Renaissance Technologies, which reported holding $129.9 million worth of stock at the end of September. It was followed by Adage Capital Management with a $60 million position. Other investors bullish on the company included Royce & Associates, Millennium Management, and AQR Capital Management.

Due to the fact that Cabot Microelectronics Corporation (NASDAQ:CCMP) has witnessed bearish sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of funds that slashed their entire stakes heading into Q3. Interestingly, D. E. Shaw’s D E Shaw dropped the largest position of all the hedgies followed by Insider Monkey, valued at about $1.6 million in stock. Steve Cohen’s fund, Point72 Asset Management, also dropped its stock, about $1.6 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Cabot Microelectronics Corporation (NASDAQ:CCMP) but similarly valued. We will take a look at Dycom Industries, Inc. (NYSE:DY), Acceleron Pharma Inc (NASDAQ:XLRN), Nextera Energy Partners LP (NYSE:NEP), and Supernus Pharmaceuticals Inc (NASDAQ:SUPN). This group of stocks’ market caps match CCMP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DY 23 212220 -3
XLRN 27 441031 3
NEP 12 56818 5
SUPN 14 59831 -3
Average 19 192475 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $192 million. That figure was $301 million in CCMP’s case. Acceleron Pharma Inc (NASDAQ:XLRN) is the most popular stock in this table. On the other hand Nextera Energy Partners LP (NYSE:NEP) is the least popular one with only 12 bullish hedge fund positions. Cabot Microelectronics Corporation (NASDAQ:CCMP) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard XLRN might be a better candidate to consider a long position.

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

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