Were Hedge Funds Right About Crowding Into Copart, Inc. (CPRT)?

In this article we will check out the progression of hedge fund sentiment towards Copart, Inc. (NASDAQ:CPRT) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Copart, Inc. (NASDAQ:CPRT) has experienced an increase in support from the world’s most elite money managers in recent months. Copart, Inc. (NASDAQ:CPRT) was in 60 hedge funds’ portfolios at the end of June. The all time high for this statistics is 48. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 48 hedge funds in our database with CPRT positions at the end of the first quarter. Our calculations also showed that CPRT isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

In the 21st century investor’s toolkit there are several tools investors employ to size up stocks. A duo of the most underrated tools are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the top fund managers can outperform the broader indices by a solid margin (see the details here).

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind we’re going to take a gander at the new hedge fund action surrounding Copart, Inc. (NASDAQ:CPRT).

How are hedge funds trading Copart, Inc. (NASDAQ:CPRT)?

At the end of June, a total of 60 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CPRT over the last 20 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Gobi Capital was the largest shareholder of Copart, Inc. (NASDAQ:CPRT), with a stake worth $66.1 million reported as of the end of September. Trailing Gobi Capital was Echo Street Capital Management, which amassed a stake valued at $59.1 million. Citadel Investment Group, Nitorum Capital, and Praesidium Investment Management Company 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 Incline Global Management allocated the biggest weight to Copart, Inc. (NASDAQ:CPRT), around 6.57% of its 13F portfolio. Highside Global Management is also relatively very bullish on the stock, designating 6.24 percent of its 13F equity portfolio to CPRT.

Consequently, specific money managers were breaking ground themselves. Praesidium Investment Management Company, managed by Kevin Oram and Peter Uddo, initiated the most outsized position in Copart, Inc. (NASDAQ:CPRT). Praesidium Investment Management Company had $55.8 million invested in the company at the end of the quarter. Jeff Lignelli’s Incline Global Management also initiated a $31.2 million position during the quarter. The other funds with new positions in the stock are Amit Nitin Doshi’s Harbor Spring Capital, Renaissance Technologies, and Dmitry Balyasny’s Balyasny Asset Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Copart, Inc. (NASDAQ:CPRT) but similarly valued. These stocks are Banco Santander (Brasil) SA (NYSE:BSBR), Mettler-Toledo International Inc. (NYSE:MTD), Carrier Global Corporation (NYSE:CARR), Lennar Corporation (NYSE:LEN), Energy Transfer L.P. (NYSE:ET), Church & Dwight Co., Inc. (NYSE:CHD), and MarketAxess Holdings Inc. (NASDAQ:MKTX). This group of stocks’ market caps resemble CPRT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BSBR 10 18916 2
MTD 27 584124 -4
CARR 44 1524605 41
LEN 55 1692845 -2
ET 31 552361 -2
CHD 33 508177 -3
MKTX 33 918191 6
Average 33.3 828460 5.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.3 hedge funds with bullish positions and the average amount invested in these stocks was $828 million. That figure was $827 million in CPRT’s case. Lennar Corporation (NYSE:LEN) is the most popular stock in this table. On the other hand Banco Santander (Brasil) SA (NYSE:BSBR) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Copart, Inc. (NASDAQ:CPRT) is more popular among hedge funds. Our overall hedge fund sentiment score for CPRT is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 returned 29.2% in 2020 through October 16th but still managed to beat the market by 19.7 percentage points. Hedge funds were also right about betting on CPRT as the stock returned 40.7% since the end of June (through 10/16) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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