Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 835 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider Cantel Medical Corp. (NYSE:CMD) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Cantel Medical Corp. (NYSE:CMD) was in 11 hedge funds’ portfolios at the end of the fourth quarter of 2019. CMD has experienced a decrease in activity from the world’s largest hedge funds recently. There were 13 hedge funds in our database with CMD holdings at the end of the previous quarter. Our calculations also showed that CMD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a gander at the fresh hedge fund action regarding Cantel Medical Corp. (NYSE:CMD).
How have hedgies been trading Cantel Medical Corp. (NYSE:CMD)?
At the end of the fourth quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from the previous quarter. On the other hand, there were a total of 13 hedge funds with a bullish position in CMD a year ago. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Mark N. Diker’s Diker Management has the largest position in Cantel Medical Corp. (NYSE:CMD), worth close to $82.5 million, comprising 53.4% of its total 13F portfolio. The second most bullish fund manager is Robert Joseph Caruso of Select Equity Group, with a $10.2 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism comprise Ken Griffin’s Citadel Investment Group, Mario Gabelli’s GAMCO Investors and Richard Chilton’s Chilton Investment Company. In terms of the portfolio weights assigned to each position Diker Management allocated the biggest weight to Cantel Medical Corp. (NYSE:CMD), around 53.42% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, designating 0.26 percent of its 13F equity portfolio to CMD.
Due to the fact that Cantel Medical Corp. (NYSE:CMD) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of fund managers that slashed their entire stakes heading into Q4. Intriguingly, Justin John Ferayorni’s Tamarack Capital Management dropped the biggest investment of the 750 funds monitored by Insider Monkey, valued at about $10.1 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund dropped about $5.2 million worth. These moves are interesting, as total hedge fund interest was cut by 2 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Cantel Medical Corp. (NYSE:CMD) but similarly valued. These stocks are YETI Holdings, Inc. (NYSE:YETI), Teradata Corporation (NYSE:TDC), Colliers International Group Inc (NASDAQ:CIGI), and EnLink Midstream LLC (NYSE:ENLC). This group of stocks’ market caps match CMD’s market cap.
|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 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $293 million. That figure was $103 million in CMD’s case. Teradata Corporation (NYSE:TDC) is the most popular stock in this table. On the other hand EnLink Midstream LLC (NYSE:ENLC) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Cantel Medical Corp. (NYSE:CMD) is even less popular than ENLC. Hedge funds dodged a bullet by taking a bearish stance towards CMD. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately CMD wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CMD investors were disappointed as the stock returned -54.8% during the same time period 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 so far in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.