Is Carnival Corporation (CCL) Stock A Buy or Sell?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Carnival Corporation & plc (NYSE:CCL).

Is CCL stock a buy or sell? Carnival Corporation & plc (NYSE:CCL) was in 47 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 53. CCL shareholders have witnessed an increase in hedge fund sentiment recently. There were 37 hedge funds in our database with CCL positions at the end of the third quarter. Our calculations also showed that CCL isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Matthew Halbower Pentwater Capital

Matthew Halbower of Pentwater Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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 (or at the end of this article). Now let’s take a look at the new hedge fund action surrounding Carnival Corporation & plc (NYSE:CCL).

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

Heading into the first quarter of 2021, a total of 47 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CCL over the last 22 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, D. E. Shaw’s D E Shaw has the largest position in Carnival Corporation & plc (NYSE:CCL), worth close to $355 million, comprising 0.3% of its total 13F portfolio. The second most bullish fund manager is Marshall Wace LLP, managed by Paul Marshall and Ian Wace, which holds a $226 million position; 1.2% of its 13F portfolio is allocated to the stock. Remaining professional money managers with similar optimism include Doug Silverman and Alexander Klabin’s Senator Investment Group, Jack Woodruff’s Candlestick Capital Management and Kevin D. Eng’s Columbus Hill Capital Management. In terms of the portfolio weights assigned to each position Covalent Capital Partners allocated the biggest weight to Carnival Corporation & plc (NYSE:CCL), around 7.74% of its 13F portfolio. Columbus Hill Capital Management is also relatively very bullish on the stock, earmarking 4.52 percent of its 13F equity portfolio to CCL.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Candlestick Capital Management, managed by Jack Woodruff, created the most outsized position in Carnival Corporation & plc (NYSE:CCL). Candlestick Capital Management had $74.6 million invested in the company at the end of the quarter. Kevin D. Eng’s Columbus Hill Capital Management also made a $60.8 million investment in the stock during the quarter. The other funds with brand new CCL positions are Hyder Ahmad’s Broad Peak Investment Holdings, John Brennan’s Sirios Capital Management, and Matthew Halbower’s Pentwater Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Carnival Corporation & plc (NYSE:CCL) but similarly valued. These stocks are Fortive Corporation (NYSE:FTV), Arthur J. Gallagher & Co. (NYSE:AJG), Edison International (NYSE:EIX), Maxim Integrated Products Inc. (NASDAQ:MXIM), Rogers Communications Inc. (NYSE:RCI), Tyson Foods, Inc. (NYSE:TSN), and DTE Energy Company (NYSE:DTE). This group of stocks’ market valuations are closest to CCL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FTV 33 1116808 -1
AJG 24 142669 -11
EIX 30 1441563 2
MXIM 54 2844204 2
RCI 15 279915 0
TSN 38 867498 2
DTE 29 309932 1
Average 31.9 1000370 -0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.9 hedge funds with bullish positions and the average amount invested in these stocks was $1000 million. That figure was $1197 million in CCL’s case. Maxim Integrated Products Inc. (NASDAQ:MXIM) is the most popular stock in this table. On the other hand Rogers Communications Inc. (NYSE:RCI) is the least popular one with only 15 bullish hedge fund positions. Carnival Corporation & plc (NYSE:CCL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CCL is 77.6. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on CCL as the stock returned 33.7% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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