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Were Hedge Funds Right About Cavco Industries (CVCO)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (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. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Cavco Industries, Inc. (NASDAQ:CVCO) in this article.

Cavco Industries, Inc. (NASDAQ:CVCO) has experienced a decrease in enthusiasm from smart money lately. CVCO was in 20 hedge funds’ portfolios at the end of December. There were 21 hedge funds in our database with CVCO holdings at the end of the previous quarter. Our calculations also showed that CVCO 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.

Mario Gabelli of GAMCO Investors

We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. 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 (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). 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 we’re going to take a peek at the fresh hedge fund action encompassing Cavco Industries, Inc. (NASDAQ:CVCO).

Hedge fund activity in Cavco Industries, Inc. (NASDAQ:CVCO)

At Q4’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CVCO over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, GAMCO Investors was the largest shareholder of Cavco Industries, Inc. (NASDAQ:CVCO), with a stake worth $53 million reported as of the end of September. Trailing GAMCO Investors was Broad Bay Capital, which amassed a stake valued at $34 million. Renaissance Technologies, Tontine Asset Management, and Fisher Asset Management 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 Broad Bay Capital allocated the biggest weight to Cavco Industries, Inc. (NASDAQ:CVCO), around 8.1% of its 13F portfolio. Tontine Asset Management is also relatively very bullish on the stock, setting aside 2.05 percent of its 13F equity portfolio to CVCO.

Since Cavco Industries, Inc. (NASDAQ:CVCO) has faced falling interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of funds that decided to sell off their positions entirely heading into Q4. Intriguingly, Matthew Hulsizer’s PEAK6 Capital Management sold off the largest investment of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $1 million in stock. Brad Dunkley and Blair Levinsky’s fund, Waratah Capital Advisors, also cut its stock, about $0.7 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 1 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Cavco Industries, Inc. (NASDAQ:CVCO). These stocks are NBT Bancorp Inc. (NASDAQ:NBTB), Northwest Bancshares, Inc. (NASDAQ:NWBI), American Woodmark Corporation (NASDAQ:AMWD), and BrightView Holdings, Inc. (NYSE:BV). This group of stocks’ market valuations are similar to CVCO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NBTB 7 13039 1
NWBI 19 66676 -1
AMWD 17 50799 2
BV 9 273928 -2
Average 13 101111 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $101 million. That figure was $171 million in CVCO’s case. Northwest Bancshares, Inc. (NASDAQ:NWBI) is the most popular stock in this table. On the other hand NBT Bancorp Inc. (NASDAQ:NBTB) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Cavco Industries, Inc. (NASDAQ:CVCO) is more popular among hedge funds. 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 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th and still beat the market by 4.2 percentage points. Unfortunately CVCO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CVCO were disappointed as the stock returned -38.4% during the three months of 2020 (through April 6th) 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.
5 Most Popular Stocks Among Hedge Funds
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.

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