We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Crane Co. (NYSE:CR).
Is Crane Co. (NYSE:CR) going to take off soon? Hedge funds are taking a bearish view. The number of bullish hedge fund positions fell by 5 in recent months. Our calculations also showed that CR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Lee Ainslie of Maverick Capital
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to take a glance at the key hedge fund action regarding Crane Co. (NYSE:CR).
How have hedgies been trading Crane Co. (NYSE:CR)?
At Q3’s end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in CR over the last 17 quarters. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, GAMCO Investors was the largest shareholder of Crane Co. (NYSE:CR), with a stake worth $157.8 million reported as of the end of September. Trailing GAMCO Investors was AQR Capital Management, which amassed a stake valued at $66.8 million. Citadel Investment Group, Two Sigma Advisors, and Marshall Wace 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 GAMCO Investors allocated the biggest weight to Crane Co. (NYSE:CR), around 1.31% of its 13F portfolio. Bailard Inc is also relatively very bullish on the stock, earmarking 0.22 percent of its 13F equity portfolio to CR.
Judging by the fact that Crane Co. (NYSE:CR) has witnessed falling interest from the aggregate hedge fund industry, we can see that there is a sect of hedgies that decided to sell off their full holdings by the end of the third quarter. It’s worth mentioning that Gregg Moskowitz’s Interval Partners dumped the biggest position of the 750 funds watched by Insider Monkey, worth about $3.7 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund cut about $1.7 million worth. These moves are important to note, as total hedge fund interest fell by 5 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks similar to Crane Co. (NYSE:CR). These stocks are Emcor Group Inc (NYSE:EME), Blackstone Mortgage Trust Inc (NYSE:BXMT), 10x Genomics, Inc. (NASDAQ:TXG), and Macy’s, Inc. (NYSE:M). This group of stocks’ market caps are similar to CR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EME | 25 | 242826 | 3 |
| BXMT | 15 | 84778 | -5 |
| TXG | 19 | 135952 | 19 |
| M | 28 | 652339 | -3 |
| Average | 21.75 | 278974 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $279 million. That figure was $336 million in CR’s case. Macy’s, Inc. (NYSE:M) is the most popular stock in this table. On the other hand Blackstone Mortgage Trust Inc (NYSE:BXMT) is the least popular one with only 15 bullish hedge fund positions. Crane Co. (NYSE:CR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CR investors were disappointed as the stock returned 3.5% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
