While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Casper Sleep Inc. (NYSE:CSPR).
Is CSPR a good stock to buy now? Investors who are in the know were in an optimistic mood. The number of long hedge fund bets went up by 5 recently. Casper Sleep Inc. (NYSE:CSPR) was in 7 hedge funds’ portfolios at the end of September. The all time high for this statistics is 4. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CSPR 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 2 hedge funds in our database with CSPR positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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. With all of this in mind let’s go over the latest hedge fund action surrounding Casper Sleep Inc. (NYSE:CSPR).
What does smart money think about Casper Sleep Inc. (NYSE:CSPR)?
Heading into the fourth quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 250% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in CSPR a year ago. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
More specifically, Crosslink Capital was the largest shareholder of Casper Sleep Inc. (NYSE:CSPR), with a stake worth $4 million reported as of the end of September. Trailing Crosslink Capital was Millennium Management, which amassed a stake valued at $0.5 million. Citadel Investment Group, Renaissance Technologies, and Arrowstreet 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 Crosslink Capital allocated the biggest weight to Casper Sleep Inc. (NYSE:CSPR), around 0.86% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, dishing out 0.0019 percent of its 13F equity portfolio to CSPR.
Now, some big names were leading the bulls’ herd. Millennium Management, managed by Israel Englander, established the largest position in Casper Sleep Inc. (NYSE:CSPR). Millennium Management had $0.5 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $0.3 million position during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, John Overdeck and David Siegel’s Two Sigma Advisors, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s go over hedge fund activity in other stocks similar to Casper Sleep Inc. (NYSE:CSPR). We will take a look at Genco Shipping & Trading Limited (NYSE:GNK), CURO Group Holdings Corp. (NYSE:CURO), Cheetah Mobile Inc (NYSE:CMCM), MidWestOne Financial Group, Inc. (NASDAQ:MOFG), SCVX Corp. (NYSE:SCVX), Solaris Oilfield Infrastructure, Inc. (NYSE:SOI), and Cassava Sciences, Inc. (NASDAQ:SAVA). This group of stocks’ market valuations are closest to CSPR’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.4 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $5 million in CSPR’s case. SCVX Corp. (NYSE:SCVX) is the most popular stock in this table. On the other hand Cheetah Mobile Inc (NYSE:CMCM) is the least popular one with only 4 bullish hedge fund positions. Casper Sleep Inc. (NYSE:CSPR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CSPR is 51.5. 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. 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 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 surpassed the market again by 16 percentage points. Unfortunately CSPR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CSPR investors were disappointed as the stock returned -12.5% since the end of September (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.