Is Cooper-Standard Holdings Inc (NYSE:CPS) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is CPS a good stock to buy now? The best stock pickers were taking a pessimistic view. The number of bullish hedge fund bets shrunk by 2 recently. Cooper-Standard Holdings Inc (NYSE:CPS) was in 11 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 25. Our calculations also showed that CPS 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). There were 13 hedge funds in our database with CPS positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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. Now we’re going to take a look at the key hedge fund action encompassing Cooper-Standard Holdings Inc (NYSE:CPS).
Do Hedge Funds Think CPS Is A Good Stock To Buy Now?
At the end of September, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the second quarter of 2020. By comparison, 17 hedge funds held shares or bullish call options in CPS 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Steven Baughman’s Divisar Capital has the largest position in Cooper-Standard Holdings Inc (NYSE:CPS), worth close to $13.7 million, comprising 4.5% of its total 13F portfolio. The second largest stake is held by Two Sigma Advisors, led by John Overdeck and David Siegel, holding a $3.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other members of the smart money that are bullish comprise D. E. Shaw’s D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Divisar Capital allocated the biggest weight to Cooper-Standard Holdings Inc (NYSE:CPS), around 4.52% of its 13F portfolio. Invenomic Capital Management is also relatively very bullish on the stock, designating 0.32 percent of its 13F equity portfolio to CPS.
Since Cooper-Standard Holdings Inc (NYSE:CPS) has witnessed a decline in interest from the aggregate hedge fund industry, we can see that there exists a select few hedge funds who were dropping their positions entirely heading into Q4. Intriguingly, Ken Griffin’s Citadel Investment Group dumped the biggest position of all the hedgies watched by Insider Monkey, comprising close to $1.1 million in stock. Greg Eisner’s fund, Engineers Gate Manager, also said goodbye to its stock, about $0.8 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 2 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks similar to Cooper-Standard Holdings Inc (NYSE:CPS). These stocks are Westport Fuel Systems Inc. (NASDAQ:WPRT), Macatawa Bank Corporation (NASDAQ:MCBC), Park Aerospace Corp. (NYSE:PKE), Entercom Communications Corp. (NYSE:ETM), Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC), EMX Royalty Corporation (NYSE:EMX), and Old Second Bancorp Inc. (NASDAQ:OSBC). All of these stocks’ market caps resemble CPS’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 10.3 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $25 million in CPS’s case. Entercom Communications Corp. (NYSE:ETM) is the most popular stock in this table. On the other hand EMX Royalty Corporation (NYSE:EMX) is the least popular one with only 3 bullish hedge fund positions. Cooper-Standard Holdings Inc (NYSE:CPS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CPS is 44.8. 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. Hedge funds were also right about betting on CPS as the stock returned 197.4% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.