We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Carpenter Technology Corporation (NYSE:CRS), and what that likely means for the prospects of the company and its stock.
Carpenter Technology Corporation (NYSE:CRS) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 9 hedge funds’ portfolios at the end of September, same as at the end of June. At the end of this article we will also compare CRS to other stocks including Coeur d’Alene Mines Corporation (NYSE:CDE), Pebblebrook Hotel Trust (NYSE:PEB), and Texas Pacific Land Trust (NYSE:TPL) to get a better sense of its popularity.
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
How have hedgies been trading Carpenter Technology Corporation (NYSE:CRS)?
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in CRS at the end of the third quarter of 2015, so hedge fund ownership has fallen greatly in the last year. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Joe Huber’s Huber Capital Management has the most valuable position in Carpenter Technology Corporation (NYSE:CRS), worth close to $55.5 million, amounting to 2.2% of its total 13F portfolio. The second most bullish fund manager is Royce & Associates, led by Chuck Royce, which holds a $21.2 million position. Remaining members of the smart money with similar optimism consist of Ken Griffin’s Citadel Investment Group, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Millennium Management, one of the 10 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-micro-cap stocks.