Is CSGP A Good Stock To Buy Now?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider CoStar Group Inc (NASDAQ:CSGP) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is CSGP a good stock to buy now? The best stock pickers were betting on the stock. The number of long hedge fund bets increased by 5 lately. CoStar Group Inc (NASDAQ:CSGP) was in 55 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 50. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CSGP 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 50 hedge funds in our database with CSGP 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.

Charles Akre of Akre Capital Management

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 take a look at the key hedge fund action encompassing CoStar Group Inc (NASDAQ:CSGP).

Hedge fund activity in CoStar Group Inc (NASDAQ:CSGP)

At the end of the third quarter, a total of 55 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CSGP over the last 21 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

More specifically, Akre Capital Management was the largest shareholder of CoStar Group Inc (NASDAQ:CSGP), with a stake worth $813.5 million reported as of the end of September. Trailing Akre Capital Management was Alkeon Capital Management, which amassed a stake valued at $317.7 million. Bares Capital Management, Viking Global, and Select Equity 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 Wildcat Capital Management allocated the biggest weight to CoStar Group Inc (NASDAQ:CSGP), around 21.69% of its 13F portfolio. Pelham Capital is also relatively very bullish on the stock, dishing out 15.37 percent of its 13F equity portfolio to CSGP.

As one would reasonably expect, specific money managers were breaking ground themselves. Viking Global, managed by Andreas Halvorsen, initiated the biggest position in CoStar Group Inc (NASDAQ:CSGP). Viking Global had $254.7 million invested in the company at the end of the quarter. Ross Turner’s Pelham Capital also made a $198.8 million investment in the stock during the quarter. The following funds were also among the new CSGP investors: James Parsons’s Junto Capital Management, Dmitry Balyasny’s Balyasny Asset Management, and Ravee Mehta’s Nishkama Capital.

Let’s now review hedge fund activity in other stocks similar to CoStar Group Inc (NASDAQ:CSGP). These stocks are Canadian Imperial Bank of Commerce (NYSE:CM), Ross Stores, Inc. (NASDAQ:ROST), Capital One Financial Corp. (NYSE:COF), Synopsys, Inc. (NASDAQ:SNPS), Mizuho Financial Group Inc. (NYSE:MFG), Amphenol Corporation (NYSE:APH), and TE Connectivity Ltd. (NYSE:TEL). All of these stocks’ market caps resemble CSGP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CM 12 155900 6
ROST 46 755549 -4
COF 42 2539275 -13
SNPS 32 1058943 -2
MFG 5 12057 -3
APH 49 1163214 7
TEL 33 2008750 -6
Average 31.3 1099098 -2.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.3 hedge funds with bullish positions and the average amount invested in these stocks was $1099 million. That figure was $3047 million in CSGP’s case. Amphenol Corporation (NYSE:APH) is the most popular stock in this table. On the other hand Mizuho Financial Group Inc. (NYSE:MFG) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks CoStar Group Inc (NASDAQ:CSGP) is more popular among hedge funds. Our overall hedge fund sentiment score for CSGP is 90. 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Unfortunately CSGP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CSGP were disappointed as the stock returned 2.4% since the end of the third quarter (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 most of these stocks already outperformed the market in 2020.

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