Is CREE A Good Stock To Buy According To Hedge Funds?

After several tireless days we have finished crunching the numbers from nearly 817 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Cree, Inc. (NASDAQ:CREE).

Is CREE a good stock to buy? Cree, Inc. (NASDAQ:CREE) investors should pay attention to an increase in support from the world’s most elite money managers of late. Cree, Inc. (NASDAQ:CREE) was in 30 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 25. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CREE 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.

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.

Glen Kacher of Light Street Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis 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 we’re going to check out the latest hedge fund action surrounding Cree, Inc. (NASDAQ:CREE).

Do Hedge Funds Think CREE Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 76% from the second quarter of 2020. On the other hand, there were a total of 23 hedge funds with a bullish position in CREE a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Whale Rock Capital Management held the most valuable stake in Cree, Inc. (NASDAQ:CREE), which was worth $214.6 million at the end of the third quarter. On the second spot was Coatue Management which amassed $144.2 million worth of shares. Iridian Asset Management, Light Street Capital, and Samlyn Capital 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 Iridian Asset Management allocated the biggest weight to Cree, Inc. (NASDAQ:CREE), around 1.98% of its 13F portfolio. Fairpointe Capital is also relatively very bullish on the stock, designating 1.92 percent of its 13F equity portfolio to CREE.

As industrywide interest jumped, some big names have jumped into Cree, Inc. (NASDAQ:CREE) headfirst. Point72 Asset Management, managed by Steve Cohen, assembled the largest position in Cree, Inc. (NASDAQ:CREE). Point72 Asset Management had $7.5 million invested in the company at the end of the quarter. Michael Rockefeller and KarláKroeker’s Woodline Partners also initiated a $7.3 million position during the quarter. The following funds were also among the new CREE investors: Andrew Sandler’s Sandler Capital Management, Dmitry Balyasny’s Balyasny Asset Management, and Till Bechtolsheimer’s Arosa Capital Management.

Let’s also examine hedge fund activity in other stocks similar to Cree, Inc. (NASDAQ:CREE). These stocks are AMERCO (NASDAQ:UHAL), IAA, Inc. (NYSE:IAA), Store Capital Corporation (NYSE:STOR), Mohawk Industries, Inc. (NYSE:MHK), GFL Environmental Inc. (NYSE:GFL), argenx SE (NASDAQ:ARGX), and Knight-Swift Transportation Holdings Inc. (NYSE:KNX). This group of stocks’ market caps match CREE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UHAL 19 437403 -1
IAA 36 1299677 -7
STOR 20 763350 4
MHK 41 701743 9
GFL 20 361757 4
ARGX 22 1144400 -7
KNX 52 618019 13
Average 30 760907 2.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $761 million. That figure was $650 million in CREE’s case. Knight-Swift Transportation Holdings Inc. (NYSE:KNX) is the most popular stock in this table. On the other hand AMERCO (NASDAQ:UHAL) is the least popular one with only 19 bullish hedge fund positions. Cree, Inc. (NASDAQ:CREE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CREE is 56.7. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. A small number of hedge funds were also right about betting on CREE as the stock returned 53.3% since the end of the third quarter (through 12/18) and outperformed the market by an even larger margin.

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