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Were Hedge Funds Right About Ditching CBIZ, Inc. (CBZ)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of CBIZ, Inc. (NYSE:CBZ) based on that data and determine whether they were really smart about the stock.

Is CBIZ, Inc. (NYSE:CBZ) a splendid investment today? Money managers were becoming less hopeful. The number of bullish hedge fund bets were trimmed by 3 recently. Our calculations also showed that CBZ 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.

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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

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 take a peek at the new hedge fund action surrounding CBIZ, Inc. (NYSE:CBZ).

How have hedgies been trading CBIZ, Inc. (NYSE:CBZ)?

At Q1’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in CBZ over the last 18 quarters. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Is CBZ A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Claus Moller’s P2 Capital Partners has the most valuable position in CBIZ, Inc. (NYSE:CBZ), worth close to $62.4 million, corresponding to 7.5% of its total 13F portfolio. Coming in second is Amy Minella of Cardinal Capital, with a $55.1 million position; 2.7% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions comprise Renaissance Technologies, D. E. Shaw’s D E Shaw and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position P2 Capital Partners allocated the biggest weight to CBIZ, Inc. (NYSE:CBZ), around 7.46% of its 13F portfolio. Cardinal Capital is also relatively very bullish on the stock, dishing out 2.71 percent of its 13F equity portfolio to CBZ.

Since CBIZ, Inc. (NYSE:CBZ) has experienced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedgies that decided to sell off their entire stakes heading into Q4. It’s worth mentioning that Joseph Mathias’s Concourse Capital Management dropped the biggest investment of the “upper crust” of funds followed by Insider Monkey, comprising close to $1.6 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also dumped its stock, about $0.6 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 3 funds heading into Q4.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as CBIZ, Inc. (NYSE:CBZ) but similarly valued. These stocks are iRobot Corporation (NASDAQ:IRBT), B&G Foods, Inc. (NYSE:BGS), Alcoa Corporation (NYSE:AA), and Crocs, Inc. (NASDAQ:CROX). All of these stocks’ market caps are closest to CBZ’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IRBT 19 38329 6
BGS 13 41372 -2
AA 33 213717 3
CROX 25 302666 -11
Average 22.5 149021 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $149 million. That figure was $142 million in CBZ’s case. Alcoa Corporation (NYSE:AA) is the most popular stock in this table. On the other hand B&G Foods, Inc. (NYSE:BGS) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks CBIZ, Inc. (NYSE:CBZ) is even less popular than BGS. Hedge funds dodged a bullet by taking a bearish stance towards CBZ. Our calculations showed that the top 10 most popular hedge fund stocks 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 but managed to beat the market by 15.5 percentage points. Unfortunately CBZ wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); CBZ investors were disappointed as the stock returned 14.6% 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 so far in 2020.

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