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Is Corecivic Inc. (CXW) A Good Stock To Buy?

In this article you are going to find out whether hedge funds think Corecivic Inc. (NYSE:CXW) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Corecivic Inc. (NYSE:CXW) worth your attention right now? The best stock pickers are in a pessimistic mood. The number of long hedge fund positions decreased by 7 recently. Our calculations also showed that CXW 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). CXW was in 18 hedge funds’ portfolios at the end of the first quarter of 2020. There were 25 hedge funds in our database with CXW holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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. Keeping this in mind let’s go over the recent hedge fund action regarding Corecivic Inc. (NYSE:CXW).

What does smart money think about Corecivic Inc. (NYSE:CXW)?

At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -28% from the fourth quarter of 2019. On the other hand, there were a total of 14 hedge funds with a bullish position in CXW a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CXW A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of Corecivic Inc. (NYSE:CXW), with a stake worth $49.1 million reported as of the end of September. Trailing Renaissance Technologies was Capital Growth Management, which amassed a stake valued at $23.4 million. Arrowstreet Capital, Intrinsic Edge Capital, and Citadel Investment Group 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 Capital Growth Management allocated the biggest weight to Corecivic Inc. (NYSE:CXW), around 3.29% of its 13F portfolio. Hourglass Capital is also relatively very bullish on the stock, earmarking 1.49 percent of its 13F equity portfolio to CXW.

Judging by the fact that Corecivic Inc. (NYSE:CXW) has experienced falling interest from hedge fund managers, logic holds that there is a sect of hedgies who sold off their full holdings in the first quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the biggest stake of all the hedgies followed by Insider Monkey, valued at about $5.3 million in stock. Cristan Blackman’s fund, Empirical Capital Partners, also dropped its stock, about $0.8 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 7 funds in the first quarter.

Let’s check out hedge fund activity in other stocks similar to Corecivic Inc. (NYSE:CXW). We will take a look at Main Street Capital Corporation (NYSE:MAIN), Grupo Aeroportuario del Centro Nort (NASDAQ:OMAB), Matson Inc. (NYSE:MATX), and Fresh Del Monte Produce Inc (NYSE:FDP). This group of stocks’ market caps resemble CXW’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MAIN 7 14571 -2
OMAB 4 29890 -2
MATX 3 6188 -7
FDP 6 28077 -5
Average 5 19682 -4

View table here if you experience formatting issues.

As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $110 million in CXW’s case. Main Street Capital Corporation (NYSE:MAIN) is the most popular stock in this table. On the other hand Matson Inc. (NYSE:MATX) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Corecivic Inc. (NYSE:CXW) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd and still beat the market by 15.9 percentage points. Unfortunately CXW wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CXW were disappointed as the stock returned -9.7% during the second quarter (through June 22nd) 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 in 2020.

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