You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Is Carnival plc (ADR) (NYSE:CUK) a healthy stock for your portfolio? The smart money seems to be becoming less confident. The number of long hedge fund positions that are disclosed in regulatory 13F filings retreated by one last quarter. In this way, 10 funds from our database held shares of CUK at the end of September. At the end of this article we will also compare CUK to other stocks including McKesson Corporation (NYSE:MCK), Carnival Corporation (NYSE:CCL), and eBay Inc (NASDAQ:EBAY) to get a better sense of its popularity.
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
Now, let’s check out the fresh action regarding Carnival plc (ADR) (NYSE:CUK).
How have hedgies been trading Carnival plc (ADR) (NYSE:CUK)?
Heading into the fourth quarter of 2016, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on Carnival plc, down by 9% over the quarter. Below, you can check out the change in hedge fund sentiment towards CUK over the last five quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the biggest position in Carnival plc (ADR) (NYSE:CUK), worth close to $26.7 million, corresponding to 0.1% of its total 13F portfolio. Coming in second is Marshall Wace LLP, led by Paul Marshall and Ian Wace, which holds a $4.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism comprise Bart Baum’s Ionic Capital Management, John Overdeck and David Siegel’s Two Sigma Advisors, and Renaissance Technologies, one of the largest hedge funds in the world. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Because Carnival plc (ADR) (NYSE:CUK) has witnessed falling interest from the smart money, logic holds that there lies a certain “tier” of funds that decided to sell off their entire stakes between July and September. Interestingly, D. E. Shaw’s D E Shaw dropped the largest position of the “upper crust” of funds monitored by Insider Monkey, valued at about $2.5 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund sold off about $0.5 million worth of shares.
Let’s now take a look at hedge fund activity in other stocks similar to Carnival plc (ADR) (NYSE:CUK). We will take a look at McKesson Corporation (NYSE:MCK), Carnival Corporation (NYSE:CCL), eBay Inc (NASDAQ:EBAY), and Relx NV (ADR) (NYSE:RENX). This group of stocks’ market valuations are closest to CUK’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $1..48 billion. That figure was just $41 million in CUK’s case. McKesson Corporation (NYSE:MCK) is the most popular stock in this table. On the other hand Relx NV (ADR) (NYSE:RENX) is the least popular one with only six funds holding shares. Carnival plc (ADR) (NYSE:CUK) 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, McKesson Corporation (NYSE:MCK) might be a better candidate to consider taking a long position in.