Is CBOE Stock A Buy or Sell?

In this article you are going to find out whether hedge funds think CBOE Global Markets Inc (NASDAQ:CBOE) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is CBOE stock a buy or sell? Investors who are in the know were betting on the stock. The number of bullish hedge fund bets inched up by 5 recently. CBOE Global Markets Inc (NASDAQ:CBOE) was in 38 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 38. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CBOE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 33 hedge funds in our database with CBOE holdings at the end of September.

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).

David Brown Hawk Ridge Partners

David Brown of Hawk Ridge Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 website. With all of this in mind we’re going to review the recent hedge fund action surrounding CBOE Global Markets Inc (NASDAQ:CBOE).

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

At fourth quarter’s end, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from the third quarter of 2020. By comparison, 27 hedge funds held shares or bullish call options in CBOE a year ago. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the largest position in CBOE Global Markets Inc (NASDAQ:CBOE). Renaissance Technologies has a $287.8 million position in the stock, comprising 0.3% of its 13F portfolio. The second most bullish fund manager is D. E. Shaw of D E Shaw, with a $134.4 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions include Cliff Asness’s AQR Capital Management, David Brown’s Hawk Ridge Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Truvvo Partners allocated the biggest weight to CBOE Global Markets Inc (NASDAQ:CBOE), around 9.42% of its 13F portfolio. Hawk Ridge Management is also relatively very bullish on the stock, earmarking 4.75 percent of its 13F equity portfolio to CBOE.

As aggregate interest increased, specific money managers have been driving this bullishness. Southpoint Capital Advisors, managed by John Smith Clark, established the most outsized position in CBOE Global Markets Inc (NASDAQ:CBOE). Southpoint Capital Advisors had $18.6 million invested in the company at the end of the quarter. Greg Poole’s Echo Street Capital Management also initiated a $16.9 million position during the quarter. The following funds were also among the new CBOE investors: Peter Seuss’s Prana Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Frank Fu’s CaaS Capital.

Let’s now take a look at hedge fund activity in other stocks similar to CBOE Global Markets Inc (NASDAQ:CBOE). These stocks are Denali Therapeutics Inc. (NASDAQ:DNLI), Mohawk Industries, Inc. (NYSE:MHK), Quanta Services Inc (NYSE:PWR), Globe Life Inc. (NYSE:GL), Morningstar, Inc. (NASDAQ:MORN), Fastly, Inc. (NYSE:FSLY), and Molson Coors Beverage Company (NYSE:TAP). All of these stocks’ market caps match CBOE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DNLI 20 249226 -4
MHK 39 987416 -2
PWR 33 972610 1
GL 31 828725 0
MORN 19 892130 -2
FSLY 32 1551496 10
TAP 39 386362 6
Average 30.4 838281 1.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.4 hedge funds with bullish positions and the average amount invested in these stocks was $838 million. That figure was $860 million in CBOE’s case. Mohawk Industries, Inc. (NYSE:MHK) is the most popular stock in this table. On the other hand Morningstar, Inc. (NASDAQ:MORN) is the least popular one with only 19 bullish hedge fund positions. CBOE Global Markets Inc (NASDAQ:CBOE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CBOE is 87.5. 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 CBOE as the stock returned 9.6% 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.