Is Copart (CPRT) A Good Stock To Buy Now?

We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article, we look at what those funds think of Copart, Inc. (NASDAQ:CPRT) based on that data.

Is Copart (CPRT) a good stock to buy now? CPRT has experienced a decrease in support from the world’s most elite money managers lately. Copart, Inc. (NASDAQ:CPRT) was in 56 hedge funds’ portfolios at the end of September. The all time high for this statistics is 60. Our calculations also showed that CPRT 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.

Clint Carlson of Carlson Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium 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. Now let’s review the key hedge fund action surrounding Copart, Inc. (NASDAQ:CPRT).

What does smart money think about Copart, Inc. (NASDAQ:CPRT)?

At Q3’s end, a total of 56 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the second quarter of 2020. On the other hand, there were a total of 43 hedge funds with a bullish position in CPRT a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Is CPRT A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Kevin Oram and Peter Uddo’s Praesidium Investment Management Company has the biggest position in Copart, Inc. (NASDAQ:CPRT), worth close to $106.3 million, amounting to 6.3% of its total 13F portfolio. The second largest stake is held by Gobi Capital, managed by Bo Shan, which holds a $86.7 million position; 7.7% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish include Seth Rosen’s Nitorum Capital, Greg Poole’s Echo Street Capital Management and Aaron Cowen’s Suvretta Capital Management. In terms of the portfolio weights assigned to each position Bayberry Capital Partners allocated the biggest weight to Copart, Inc. (NASDAQ:CPRT), around 8.81% of its 13F portfolio. Gobi Capital is also relatively very bullish on the stock, dishing out 7.68 percent of its 13F equity portfolio to CPRT.

Seeing as Copart, Inc. (NASDAQ:CPRT) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there were a few funds that decided to sell off their full holdings last quarter. Intriguingly, Jeff Lignelli’s Incline Global Management dumped the biggest investment of all the hedgies followed by Insider Monkey, valued at an estimated $31.2 million in stock, and Richard Merage’s MIG Capital was right behind this move, as the fund sold off about $30.5 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Copart, Inc. (NASDAQ:CPRT) but similarly valued. We will take a look at RingCentral Inc (NYSE:RNG), Credit Suisse Group AG (NYSE:CS), Skyworks Solutions Inc (NASDAQ:SWKS), China Telecom Corporation Limited (NYSE:CHA), The Trade Desk, Inc. (NASDAQ:TTD), McKesson Corporation (NYSE:MCK), and Williams Companies, Inc. (NYSE:WMB). All of these stocks’ market caps resemble CPRT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RNG 59 3300948 -3
CS 13 68386 -1
SWKS 50 886176 1
CHA 3 30054 -2
TTD 23 510796 3
MCK 54 1770079 -7
WMB 38 581626 -3
Average 34.3 1021152 -1.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.3 hedge funds with bullish positions and the average amount invested in these stocks was $1021 million. That figure was $1078 million in CPRT’s case. RingCentral Inc (NYSE:RNG) is the most popular stock in this table. On the other hand China Telecom Corporation Limited (NYSE:CHA) is the least popular one with only 3 bullish hedge fund positions. Copart, Inc. (NASDAQ:CPRT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CPRT is 76.3. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 31.6% in 2020 through December 2nd and beat the market again by 16 percentage points. Unfortunately CPRT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CPRT were disappointed as the stock returned 7.7% since the end of September (through 12/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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