Is CDK Global Inc (CDK) Going to Burn These Hedge Funds?

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of June 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards CDK Global Inc (NASDAQ:CDK).

CDK Global Inc (NASDAQ:CDK) shareholders have witnessed an increase in enthusiasm from smart money of late. CDK Global Inc (NASDAQ:CDK) was in 24 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 45. There were 18 hedge funds in our database with CDK positions at the end of the first quarter. Our calculations also showed that CDK isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the 21st century investor’s toolkit there are tons of formulas investors put to use to size up their holdings. Some of the less utilized formulas are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the best money managers can beat their index-focused peers by a solid amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.


Cliff Asness of AQR Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to take a peek at the new hedge fund action encompassing CDK Global Inc (NASDAQ:CDK).

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

At the end of the second quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CDK over the last 24 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Claus Moller’s P2 Capital Partners has the most valuable position in CDK Global Inc (NASDAQ:CDK), worth close to $74.9 million, comprising 5.6% of its total 13F portfolio. Sitting at the No. 2 spot is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $40.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions comprise Thomas Bancroft’s Makaira Partners, Chuck Royce’s Royce & Associates and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Makaira Partners allocated the biggest weight to CDK Global Inc (NASDAQ:CDK), around 6.95% of its 13F portfolio. P2 Capital Partners is also relatively very bullish on the stock, setting aside 5.62 percent of its 13F equity portfolio to CDK.

As aggregate interest increased, specific money managers have been driving this bullishness. Royce & Associates, managed by Chuck Royce, assembled the largest position in CDK Global Inc (NASDAQ:CDK). Royce & Associates had $13.7 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $6.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Frank Fu’s CaaS Capital, Sander Gerber’s Hudson Bay Capital Management, and Jinghua Yan’s TwinBeech Capital.

Let’s now take a look at hedge fund activity in other stocks similar to CDK Global Inc (NASDAQ:CDK). We will take a look at Popular Inc (NASDAQ:BPOP), Primerica, Inc. (NYSE:PRI), BOK Financial Corporation (NASDAQ:BOKF), Hayward Holdings, Inc. (NYSE:HAYW), Eagle Materials, Inc. (NYSE:EXP), CACI International Inc (NYSE:CACI), and Pan American Silver Corp. (NASDAQ:PAAS). This group of stocks’ market values are closest to CDK’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BPOP 33 840477 -1
PRI 20 486272 0
BOKF 13 438145 -4
HAYW 19 225060 -6
EXP 36 243658 1
CACI 26 491404 5
PAAS 24 312456 -3
Average 24.4 433925 -1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.4 hedge funds with bullish positions and the average amount invested in these stocks was $434 million. That figure was $226 million in CDK’s case. Eagle Materials, Inc. (NYSE:EXP) is the most popular stock in this table. On the other hand BOK Financial Corporation (NASDAQ:BOKF) is the least popular one with only 13 bullish hedge fund positions. CDK Global Inc (NASDAQ:CDK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CDK is 49.9. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately CDK wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CDK investors were disappointed as the stock returned -10.7% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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