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Were Hedge Funds Right About CorVel Corporation (CRVL)?

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. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of CorVel Corporation (NASDAQ:CRVL) based on that data.

CorVel Corporation (NASDAQ:CRVL) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 14 hedge funds’ portfolios at the end of the fourth quarter of 2019. At the end of this article we will also compare CRVL to other stocks including G-III Apparel Group, Ltd. (NASDAQ:GIII), GreenSky, Inc. (NASDAQ:GSKY), and Arvinas, Inc. (NASDAQ:ARVN) to get a better sense of its popularity.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that 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.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

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 review the fresh hedge fund action surrounding CorVel Corporation (NASDAQ:CRVL).

How are hedge funds trading CorVel Corporation (NASDAQ:CRVL)?

Heading into the first quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in CRVL a year ago. 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, Renaissance Technologies was the largest shareholder of CorVel Corporation (NASDAQ:CRVL), with a stake worth $114.9 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $13.2 million. Citadel Investment Group, Arrowstreet Capital, and GLG Partners 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 Zebra Capital Management allocated the biggest weight to CorVel Corporation (NASDAQ:CRVL), around 0.44% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, setting aside 0.11 percent of its 13F equity portfolio to CRVL.

Because CorVel Corporation (NASDAQ:CRVL) has faced falling interest from the entirety of the hedge funds we track, logic holds that there was a specific group of hedgies who were dropping their positions entirely by the end of the third quarter. It’s worth mentioning that Paul Tudor Jones’s Tudor Investment Corp said goodbye to the biggest position of all the hedgies monitored by Insider Monkey, worth about $0.4 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund dumped about $0.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to CorVel Corporation (NASDAQ:CRVL). These stocks are G-III Apparel Group, Ltd. (NASDAQ:GIII), GreenSky, Inc. (NASDAQ:GSKY), Arvinas, Inc. (NASDAQ:ARVN), and Allscripts Healthcare Solutions Inc (NASDAQ:MDRX). All of these stocks’ market caps resemble CRVL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GIII 19 119971 6
GSKY 12 36683 -4
ARVN 26 473211 14
MDRX 31 209934 11
Average 22 209950 6.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $210 million. That figure was $155 million in CRVL’s case. Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) is the most popular stock in this table. On the other hand GreenSky, Inc. (NASDAQ:GSKY) is the least popular one with only 12 bullish hedge fund positions. CorVel Corporation (NASDAQ:CRVL) 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 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 but beat the market by 4.2 percentage points. Unfortunately CRVL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CRVL investors were disappointed as the stock returned -34.2% 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 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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