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 CIRCOR International, Inc. (NYSE:CIR).
Is CIR a good stock to buy now? CIRCOR International, Inc. (NYSE:CIR) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 9 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that CIR 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 CIR to other stocks including Humanigen, Inc. (NASDAQ:HGEN), International Money Express, Inc. (NASDAQ:IMXI), and Molecular Templates, Inc. (NASDAQ:MTEM) to get a better sense of its popularity.
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 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. Keeping this in mind we’re going to review the new hedge fund action encompassing CIRCOR International, Inc. (NYSE:CIR).
Do Hedge Funds Think CIR Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2020. On the other hand, there were a total of 14 hedge funds with a bullish position in CIR a year ago. 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).
The largest stake in CIRCOR International, Inc. (NYSE:CIR) was held by GAMCO Investors, which reported holding $35.6 million worth of stock at the end of September. It was followed by Cardinal Capital with a $26.9 million position. Other investors bullish on the company included Royce & Associates, Arrowstreet Capital, and Ratan Capital Group. In terms of the portfolio weights assigned to each position Cardinal Capital allocated the biggest weight to CIRCOR International, Inc. (NYSE:CIR), around 1.12% of its 13F portfolio. Ratan Capital Group is also relatively very bullish on the stock, dishing out 0.62 percent of its 13F equity portfolio to CIR.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: ExodusPoint Capital. 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 Millennium Management).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as CIRCOR International, Inc. (NYSE:CIR) but similarly valued. We will take a look at Humanigen, Inc. (NASDAQ:HGEN), International Money Express, Inc. (NASDAQ:IMXI), Molecular Templates, Inc. (NASDAQ:MTEM), Endeavour Silver Corp. (NYSE:EXK), Harmonic Inc (NASDAQ:HLIT), Oyster Point Pharma, Inc. (NASDAQ:OYST), and Forte Biosciences, Inc. (NASDAQ:FBRX). This group of stocks’ market caps match CIR’s market cap.
|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 12.4 hedge funds with bullish positions and the average amount invested in these stocks was $74 million. That figure was $101 million in CIR’s case. Molecular Templates, Inc. (NASDAQ:MTEM) is the most popular stock in this table. On the other hand Humanigen, Inc. (NASDAQ:HGEN) is the least popular one with only 6 bullish hedge fund positions. CIRCOR International, Inc. (NYSE:CIR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CIR is 33.7. 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. A small number of hedge funds were also right about betting on CIR as the stock returned 34.8% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.