Is Carpenter Technology Corporation (CRS) A Good Stock To Buy?

Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Carpenter Technology Corporation (NYSE:CRS).

Carpenter Technology Corporation (NYSE:CRS) has seen a decrease in enthusiasm from smart money recently. CRS was in 13 hedge funds’ portfolios at the end of the first quarter of 2019. There were 15 hedge funds in our database with CRS positions at the end of the previous quarter. Our calculations also showed that CRS isn’t among the 30 most popular stocks among hedge funds.

To most stock holders, hedge funds are viewed as unimportant, old financial vehicles of yesteryear. While there are more than 8000 funds with their doors open today, We hone in on the upper echelon of this club, around 750 funds. These hedge fund managers control most of all hedge funds’ total capital, and by tailing their unrivaled equity investments, Insider Monkey has figured out many investment strategies that have historically outperformed Mr. Market. Insider Monkey’s flagship hedge fund strategy outstripped the S&P 500 index by around 5 percentage points a year since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).

Bruce Kovner, Caxton Associates LP

Let’s go over the recent hedge fund action regarding Carpenter Technology Corporation (NYSE:CRS).

What does smart money think about Carpenter Technology Corporation (NYSE:CRS)?

At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in CRS a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


More specifically, Royce & Associates was the largest shareholder of Carpenter Technology Corporation (NYSE:CRS), with a stake worth $25.4 million reported as of the end of March. Trailing Royce & Associates was Fisher Asset Management, which amassed a stake valued at $15.3 million. Huber Capital Management, Winton Capital Management, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

Seeing as Carpenter Technology Corporation (NYSE:CRS) has witnessed bearish sentiment from hedge fund managers, it’s safe to say that there exists a select few funds who were dropping their entire stakes last quarter. It’s worth mentioning that Jim Simons’s Renaissance Technologies dumped the largest investment of the 700 funds tracked by Insider Monkey, worth about $5.2 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund said goodbye to about $2.2 million worth. These transactions are important to note, as total hedge fund interest fell by 2 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Carpenter Technology Corporation (NYSE:CRS) but similarly valued. These stocks are American Assets Trust, Inc (NYSE:AAT), WesBanco, Inc. (NASDAQ:WSBC), Cal-Maine Foods Inc (NASDAQ:CALM), and SeaWorld Entertainment Inc (NYSE:SEAS). This group of stocks’ market valuations are closest to CRS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AAT 14 114971 0
WSBC 8 48499 3
CALM 16 170156 -2
SEAS 27 774791 -2
Average 16.25 277104 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $277 million. That figure was $82 million in CRS’s case. SeaWorld Entertainment Inc (NYSE:SEAS) is the most popular stock in this table. On the other hand WesBanco, Inc. (NASDAQ:WSBC) is the least popular one with only 8 bullish hedge fund positions. Carpenter Technology Corporation (NYSE:CRS) 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. 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 CRS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CRS investors were disappointed as the stock returned 0.7% during the same time period and underperformed the market. 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 so far in Q2.

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