Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about CBIZ, Inc. (NYSE:CBZ).
CBIZ, Inc. (NYSE:CBZ) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 14 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that CBZ isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare CBZ to other stocks including ACM Research, Inc. (NASDAQ:ACMR), Columbia Property Trust Inc (NYSE:CXP), and Xperi Holding Corporation (NASDAQ:XPER) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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. Now we’re going to analyze the fresh hedge fund action encompassing CBIZ, Inc. (NYSE:CBZ).
Do Hedge Funds Think CBZ Is A Good Stock To Buy Now?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CBZ over the last 21 quarters. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Among these funds, P2 Capital Partners held the most valuable stake in CBIZ, Inc. (NYSE:CBZ), which was worth $79.7 million at the end of the third quarter. On the second spot was Cardinal Capital which amassed $51.2 million worth of shares. Paradice Investment Management, D E Shaw, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position P2 Capital Partners allocated the biggest weight to CBIZ, Inc. (NYSE:CBZ), around 6.24% of its 13F portfolio. Paradice Investment Management is also relatively very bullish on the stock, dishing out 2.16 percent of its 13F equity portfolio to CBZ.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Engineers Gate Manager. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Gotham Asset Management).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as CBIZ, Inc. (NYSE:CBZ) but similarly valued. We will take a look at ACM Research, Inc. (NASDAQ:ACMR), Columbia Property Trust Inc (NYSE:CXP), Xperi Holding Corporation (NASDAQ:XPER), Retail Properties of America Inc (NYSE:RPAI), CVR Energy, Inc. (NYSE:CVI), National Research Corporation (NASDAQ:NRC), and LexinFintech Holdings Ltd. (NASDAQ:LX). This group of stocks’ market valuations resemble CBZ’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $186 million. That figure was $182 million in CBZ’s case. Xperi Holding Corporation (NASDAQ:XPER) is the most popular stock in this table. On the other hand National Research Corporation (NASDAQ:NRC) is the least popular one with only 6 bullish hedge fund positions. CBIZ, Inc. (NYSE:CBZ) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CBZ is 51.9. 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. 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately CBZ wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CBZ investors were disappointed as the stock returned 9% since the end of September (through 12/8) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.