Is CAE, Inc. (CAE) A Good Stock To Buy?

The Insider Monkey team has completed processing the quarterly 13F filings for the June quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards CAE, Inc. (NYSE:CAE).

Is CAE a good stock to buy? CAE, Inc. (NYSE:CAE) investors should be aware of a decrease in activity from the world’s largest hedge funds recently. CAE, Inc. (NYSE:CAE) was in 10 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 20. There were 17 hedge funds in our database with CAE holdings at the end of March. Our calculations also showed that CAE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.


Ken Griffin of Citadel Investment Group

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to take a peek at the fresh hedge fund action encompassing CAE, Inc. (NYSE:CAE).

Do Hedge Funds Think CAE Is A Good Stock To Buy Now?

At Q2’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -41% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in CAE a year ago. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

The largest stake in CAE, Inc. (NYSE:CAE) was held by Goodnow Investment Group, which reported holding $57.2 million worth of stock at the end of June. It was followed by Sandler Capital Management with a $19 million position. Other investors bullish on the company included Renaissance Technologies, BeaconLight Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Goodnow Investment Group allocated the biggest weight to CAE, Inc. (NYSE:CAE), around 4.79% of its 13F portfolio. BeaconLight Capital is also relatively very bullish on the stock, earmarking 2.33 percent of its 13F equity portfolio to CAE.

Since CAE, Inc. (NYSE:CAE) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there were a few hedgies that elected to cut their entire stakes by the end of the second quarter. Interestingly, Frank Fu’s CaaS Capital dropped the largest investment of the 750 funds monitored by Insider Monkey, totaling close to $9.2 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also dumped its stock, about $7.4 million worth. These transactions are interesting, as total hedge fund interest dropped by 7 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 CAE, Inc. (NYSE:CAE) but similarly valued. We will take a look at Smartsheet Inc. (NYSE:SMAR), Kimco Realty Corp (NYSE:KIM), Globant SA (NYSE:GLOB), Service Corporation International (NYSE:SCI), Phillips 66 Partners LP (NYSE:PSXP), Sealed Air Corporation (NYSE:SEE), and Bright Horizons Family Solutions Inc (NYSE:BFAM). This group of stocks’ market caps are similar to CAE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SMAR 49 1484257 10
KIM 20 218918 3
GLOB 23 447290 6
SCI 24 527197 1
PSXP 5 36056 0
SEE 28 705369 1
BFAM 17 107496 -1
Average 23.7 503798 2.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.7 hedge funds with bullish positions and the average amount invested in these stocks was $504 million. That figure was $102 million in CAE’s case. Smartsheet Inc. (NYSE:SMAR) is the most popular stock in this table. On the other hand Phillips 66 Partners LP (NYSE:PSXP) is the least popular one with only 5 bullish hedge fund positions. CAE, Inc. (NYSE:CAE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CAE is 18.7. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and surpassed the market again by 6.2 percentage points. Unfortunately CAE wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CAE investors were disappointed as the stock returned -1.9% since the end of June (through 9/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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