Is Cubic Corporation (CUB) A Good Stock To Buy?

After several tireless days we have finished crunching the numbers from nearly 750 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 Cubic Corporation (NYSE:CUB).

Is Cubic Corporation (NYSE:CUB) the right pick for your portfolio? Money managers are taking a bearish view. The number of bullish hedge fund bets retreated by 3 lately. Our calculations also showed that CUB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). CUB was in 16 hedge funds’ portfolios at the end of September. There were 19 hedge funds in our database with CUB positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 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.

Ken Griffin

Ken Griffin of Citadel Investment Group

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a peek at the fresh hedge fund action surrounding Cubic Corporation (NYSE:CUB).

Hedge fund activity in Cubic Corporation (NYSE:CUB)

At Q3’s end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from one quarter earlier. By comparison, 18 hedge funds held shares or bullish call options in CUB a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Is CUB A Good Stock To Buy?

According to Insider Monkey’s hedge fund database, Intrinsic Edge Capital, managed by Mark Coe, holds the most valuable position in Cubic Corporation (NYSE:CUB). Intrinsic Edge Capital has a $12.2 million position in the stock, comprising 1.4% of its 13F portfolio. The second largest stake is held by Citadel Investment Group, managed by Ken Griffin, which holds a $4.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers that are bullish contain Peter Schliemann’s Rutabaga Capital Management, Chuck Royce’s Royce & Associates and Mark Travis’s Intrepid Capital Management. In terms of the portfolio weights assigned to each position Lyon Street Capital allocated the biggest weight to Cubic Corporation (NYSE:CUB), around 2.07% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, earmarking 1.36 percent of its 13F equity portfolio to CUB.

Due to the fact that Cubic Corporation (NYSE:CUB) has witnessed falling interest from hedge fund managers, it’s safe to say that there exists a select few funds that slashed their full holdings by the end of the third quarter. Intriguingly, Ken Grossman and Glen Schneider’s SG Capital Management sold off the biggest stake of the “upper crust” of funds monitored by Insider Monkey, worth close to $19.2 million in call options, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund cut about $1.4 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 3 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Cubic Corporation (NYSE:CUB) but similarly valued. These stocks are Advanced Energy Industries, Inc. (NASDAQ:AEIS), American Equity Investment Life Holding (NYSE:AEL), Applied Industrial Technologies (NYSE:AIT), and WMS Industries Inc. (NYSE:WMS). All of these stocks’ market caps resemble CUB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AEIS 17 121893 3
AEL 18 87521 1
AIT 20 106164 2
WMS 24 335640 7
Average 19.75 162805 3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $35 million in CUB’s case. WMS Industries Inc. (NYSE:WMS) is the most popular stock in this table. On the other hand Advanced Energy Industries, Inc. (NASDAQ:AEIS) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Cubic Corporation (NYSE:CUB) is even less popular than AEIS. Hedge funds dodged a bullet by taking a bearish stance towards CUB. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CUB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CUB investors were disappointed as the stock returned -15.4% during the fourth quarter (through the end of November) 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 so far in Q4.

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