Is Companhia Brasileira de Distribuicao (CBD) A Good Stock To Buy?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Companhia Brasileira de Distribuicao (NYSE:CBD) based on those filings.

Companhia Brasileira de Distribuicao (NYSE:CBD) shareholders have witnessed a decrease in enthusiasm from smart money in recent months. CBD was in 5 hedge funds’ portfolios at the end of March. There were 9 hedge funds in our database with CBD holdings at the end of the previous quarter. Our calculations also showed that CBD isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

In today’s marketplace there are dozens of methods investors employ to assess their stock investments. A pair of the less utilized methods are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the elite money managers can outpace the S&P 500 by a solid amount (see the details here).

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the fresh hedge fund action encompassing Companhia Brasileira de Distribuicao (NYSE:CBD).

What have hedge funds been doing with Companhia Brasileira de Distribuicao (NYSE:CBD)?

At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -44% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in CBD over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Millennium Management held the most valuable stake in Companhia Brasileira de Distribuicao (NYSE:CBD), which was worth $3.9 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $1.8 million worth of shares. AQR Capital Management, Portland Hill Asset Management, and Caxton Associates LP 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 Portland Hill Asset Management allocated the biggest weight to Companhia Brasileira de Distribuicao (NYSE:CBD), around 0.5% of its 13F portfolio. Caxton Associates LP is also relatively very bullish on the stock, dishing out 0.04 percent of its 13F equity portfolio to CBD.

Because Companhia Brasileira de Distribuicao (NYSE:CBD) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few funds that decided to sell off their entire stakes by the end of the first quarter. Interestingly, Ken Fisher’s Fisher Asset Management said goodbye to the biggest investment of the “upper crust” of funds followed by Insider Monkey, worth about $25.2 million in stock. David Kowitz and Sheldon Kasowitz’s fund, Indus Capital, also dropped its stock, about $5.8 million worth. These moves are important to note, as total hedge fund interest dropped by 4 funds by the end of the first quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Companhia Brasileira de Distribuicao (NYSE:CBD) but similarly valued. These stocks are Qualys Inc (NASDAQ:QLYS), SL Green Realty Corp (NYSE:SLG), CAE, Inc. (NYSE:CAE), and QTS Realty Trust Inc (NYSE:QTS). This group of stocks’ market values are closest to CBD’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
QLYS 17 115965 -12
SLG 23 192086 -4
CAE 20 79383 10
QTS 21 365837 -2
Average 20.25 188318 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $188 million. That figure was $7 million in CBD’s case. SL Green Realty Corp (NYSE:SLG) is the most popular stock in this table. On the other hand Qualys Inc (NASDAQ:QLYS) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Companhia Brasileira de Distribuicao (NYSE:CBD) is even less popular than QLYS. Hedge funds dodged a bullet by taking a bearish stance towards CBD. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately CBD wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); CBD investors were disappointed as the stock returned -7.1% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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