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Is CAI International Inc (CAI) A Good Stock To Buy?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of CAI International Inc (NYSE:CAI).

Is CAI International Inc (NYSE:CAI) a good stock to buy? Hedge funds are taking a bearish view on the margin. The number of long hedge fund positions dropped by 1 recently. Our calculations also showed that cai isn’t among the 30 most popular stocks among hedge funds. CAI was in 16 hedge funds’ portfolios at the end of March. There were 17 hedge funds in our database with CAI holdings at the end of the previous quarter.

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Nathaniel August - Mangrove Partners

Let’s take a look at the fresh hedge fund action encompassing CAI International Inc (NYSE:CAI).

What have hedge funds been doing with CAI International Inc (NYSE:CAI)?

At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CAI over the last 15 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.

No of Hedge Funds with CAI Positions

The largest stake in CAI International Inc (NYSE:CAI) was held by Park West Asset Management, which reported holding $35 million worth of stock at the end of March. It was followed by Mangrove Partners with a $22.7 million position. Other investors bullish on the company included Royce & Associates, Weiss Asset Management, and Lonestar Capital Management.

Due to the fact that CAI International Inc (NYSE:CAI) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of money managers who were dropping their entire stakes heading into Q3. Interestingly, Peter S. Park’s Park West Asset Management dumped the largest position of all the hedgies monitored by Insider Monkey, worth about $4.6 million in stock. Israel Englander’s fund, Millennium Management, also dumped its stock, about $3.2 million worth. These moves are important to note, as aggregate hedge fund interest fell by 1 funds heading into Q3.

Let’s check out hedge fund activity in other stocks similar to CAI International Inc (NYSE:CAI). These stocks are Senseonics Holdings, Inc. (NYSE:SENS), Silvercorp Metals Inc. (NYSE:SVM), U.S. Lime & Minerals Inc. (NASDAQ:USLM), and Financial Institutions, Inc. (NASDAQ:FISI). All of these stocks’ market caps resemble CAI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SENS 10 5479 -4
SVM 9 17911 -3
USLM 4 31382 2
FISI 11 39671 1
Average 8.5 23611 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $113 million in CAI’s case. Financial Institutions, Inc. (NASDAQ:FISI) is the most popular stock in this table. On the other hand U.S. Lime & Minerals Inc. (NASDAQ:USLM) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks CAI International Inc (NYSE:CAI) 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 CAI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CAI were kind of disappointed as the stock returned 3.7% during the same period. 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.

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