At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (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. In this article, we will take a closer look at hedge fund sentiment towards C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) at the end of the first quarter and determine whether the smart money was really smart about this stock.
C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) investors should be aware of an increase in hedge fund sentiment lately. Our calculations also showed that CHRW isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to go over the key hedge fund action surrounding C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW).
What have hedge funds been doing with C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW)?
At the end of the first quarter, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from one quarter earlier. By comparison, 30 hedge funds held shares or bullish call options in CHRW a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Cliff Asness’s AQR Capital Management has the most valuable position in C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), worth close to $66.1 million, accounting for 0.1% of its total 13F portfolio. The second largest stake is held by Two Sigma Advisors, led by John Overdeck and David Siegel, holding a $44.6 million position; 0.2% of its 13F portfolio is allocated to the company. Other members of the smart money with similar optimism consist of D. E. Shaw’s D E Shaw, Ken Griffin’s Citadel Investment Group and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Cognios Capital allocated the biggest weight to C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), around 0.86% of its 13F portfolio. Quantamental Technologies is also relatively very bullish on the stock, earmarking 0.63 percent of its 13F equity portfolio to CHRW.
Now, key money managers were breaking ground themselves. Renaissance Technologies, assembled the most valuable position in C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW). Renaissance Technologies had $15.5 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $6.6 million investment in the stock during the quarter. The other funds with brand new CHRW positions are Steve Cohen’s Point72 Asset Management, David Costen Haley’s HBK Investments, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s now review hedge fund activity in other stocks similar to C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW). We will take a look at Principal Financial Group Inc (NASDAQ:PFG), DENTSPLY SIRONA Inc. (NASDAQ:XRAY), ViacomCBS Inc. (NASDAQ:VIAC), and Regions Financial Corporation (NYSE:RF). This group of stocks’ market caps are similar to CHRW’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 37 hedge funds with bullish positions and the average amount invested in these stocks was $576 million. That figure was $248 million in CHRW’s case. ViacomCBS Inc. (NASDAQ:VIAC) is the most popular stock in this table. On the other hand Principal Financial Group Inc (NASDAQ:PFG) is the least popular one with only 27 bullish hedge fund positions. C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) is not the least popular stock in this group but hedge fund interest is still below average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately CHRW wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CHRW investors were disappointed as the stock returned 20.2% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.