Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.
Computer Sciences Corporation (NYSE:CSC) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 31 hedge funds’ portfolios at the end of September. At the end of this article we will also compare CSC to other stocks including CPFL Energia S.A. (ADR) (NYSE:CPL), Valeant Pharmaceuticals Intl Inc (NYSE:VRX), and Leggett & Platt, Inc. (NYSE:LEG) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Keeping this in mind, we’re going to go over the key action encompassing Computer Sciences Corporation (NYSE:CSC).
How are hedge funds trading Computer Sciences Corporation (NYSE:CSC)?
At the end of the third quarter, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the previous quarter. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Glenview Capital, managed by Larry Robbins, holds the largest position in Computer Sciences Corporation (NYSE:CSC). Glenview Capital has a $399 million position in the stock, comprising 2.9% of its 13F portfolio. Coming in second is Barry Rosenstein of JANA Partners, with a $246.1 million position; the fund has 4.3% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions include Ken Griffin’s Citadel Investment Group, Lee Ainslie’s Maverick Capital and Cliff Asness’ AQR Capital Management.
Judging by the fact that Computer Sciences Corporation (NYSE:CSC) has experienced a decline in interest from the smart money, we can see that there exists a select few hedge funds that elected to cut their entire stakes heading into fourth quarter. It’s worth mentioning that Anand Parekh’s Alyeska Investment Group said goodbye to the biggest investment of all the hedgies monitored by Insider Monkey, valued at an estimated $52.3 million in call options.. Glenn Russell Dubin’s fund, Highbridge Capital Management, also dumped its call options, about $12.6 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Computer Sciences Corporation (NYSE:CSC) but similarly valued. These stocks are CPFL Energia S.A. (ADR) (NYSE:CPL), Valeant Pharmaceuticals Intl Inc (NYSE:VRX), Leggett & Platt, Inc. (NYSE:LEG), and Gildan Activewear Inc (USA) (NYSE:GIL). All of these stocks’ market caps are closest to CSC’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $759 million. That figure was $1.82 billion in CSC’s case. Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is the most popular stock in this table. On the other hand CPFL Energia S.A. (ADR) (NYSE:CPL) is the least popular one with only 5 bullish hedge fund positions. Computer Sciences Corporation (NYSE:CSC) is not the most popular stock in this group but hedge fund interest is still above average. Valeant which was a large-cap stock last year, isn’t really an appropriate comparison. Like they were stuck in SunEdison last year, a bunch of hedge funds are now stuck in Valeant. That’s why we think CSC is really a popular hedge fund stock and deserves a closer look.