We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Crown Holdings, Inc. (NYSE:CCK).
Is CCK a good stock to buy now? Crown Holdings, Inc. (NYSE:CCK) has experienced a decrease in hedge fund interest of late. Crown Holdings, Inc. (NYSE:CCK) was in 47 hedge funds’ portfolios at the end of September. The all time high for this statistic is 58. Our calculations also showed that CCK 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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 cannabis tech stock right now. We go through lists like the 15 best blue chip stocks to buy 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. With all of this in mind we’re going to view the key hedge fund action surrounding Crown Holdings, Inc. (NYSE:CCK).
Do Hedge Funds Think CCK Is A Good Stock To Buy Now?
At third quarter’s end, a total of 47 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CCK over the last 21 quarters. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Andrew Wellington and Jeff Keswin’s Lyrical Asset Management has the number one position in Crown Holdings, Inc. (NYSE:CCK), worth close to $261.7 million, corresponding to 4.8% of its total 13F portfolio. Sitting at the No. 2 spot is Lee Ainslie of Maverick Capital, with a $169.9 million position; the fund has 3.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism include Israel Englander’s Millennium Management, Barry Lebovits and Joshua Kuntz’s Rivulet Capital and John Smith Clark’s Southpoint Capital Advisors. In terms of the portfolio weights assigned to each position SAYA Management allocated the biggest weight to Crown Holdings, Inc. (NYSE:CCK), around 16% of its 13F portfolio. Impactive Capital is also relatively very bullish on the stock, earmarking 11.35 percent of its 13F equity portfolio to CCK.
Because Crown Holdings, Inc. (NYSE:CCK) has experienced declining sentiment from hedge fund managers, it’s easy to see that there were a few fund managers who were dropping their positions entirely last quarter. Intriguingly, Phill Gross and Robert Atchinson’s Adage Capital Management cut the largest investment of the “upper crust” of funds tracked by Insider Monkey, totaling close to $60.5 million in stock, and Greg Poole’s Echo Street Capital Management was right behind this move, as the fund cut about $41.1 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 4 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Crown Holdings, Inc. (NYSE:CCK) but similarly valued. These stocks are Packaging Corporation Of America (NYSE:PKG), Apollo Global Management Inc (NYSE:APO), Graco Inc. (NYSE:GGG), IAC/InterActiveCorp (NASDAQ:IAC), United Airlines Holdings Inc (NYSE:UAL), Penn National Gaming, Inc (NASDAQ:PENN), and Franklin Resources, Inc. (NYSE:BEN). This group of stocks’ market values match CCK’s market value.
|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 38.7 hedge funds with bullish positions and the average amount invested in these stocks was $884 million. That figure was $1487 million in CCK’s case. IAC/InterActiveCorp (NASDAQ:IAC) is the most popular stock in this table. On the other hand Packaging Corporation Of America (NYSE:PKG) is the least popular one with only 23 bullish hedge fund positions. Crown Holdings, Inc. (NYSE:CCK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CCK is 49.8. 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 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 still beat the market by 16.2 percentage points. Hedge funds were also right about betting on CCK as the stock returned 27.8% since the end of Q3 (through 12/8) 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.