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Were Hedge Funds Right About Flocking Into Cabot Microelectronics Corporation (CCMP)?

The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors endured a torrid quarter, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Cabot Microelectronics Corporation (NASDAQ:CCMP).

Cabot Microelectronics Corporation (NASDAQ:CCMP) was in 20 hedge funds’ portfolios at the end of the fourth quarter of 2018. CCMP has seen an increase in hedge fund interest lately. There were 19 hedge funds in our database with CCMP positions at the end of the previous quarter. Our calculations also showed that CCMP isn’t among the 30 most popular stocks among hedge funds.

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 market by 32 percentage points since May 2014 through March 12, 2019 (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 our short portfolio.

Phill Gross, Adage Capital Management

We’re going to take a gander at the latest hedge fund action surrounding Cabot Microelectronics Corporation (NASDAQ:CCMP).

How have hedgies been trading Cabot Microelectronics Corporation (NASDAQ:CCMP)?

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. On the other hand, there were a total of 21 hedge funds with a bullish position in CCMP a year ago. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

CCMP_apr2019

The largest stake in Cabot Microelectronics Corporation (NASDAQ:CCMP) was held by Renaissance Technologies, which reported holding $126.3 million worth of stock at the end of September. It was followed by Adage Capital Management with a $59.8 million position. Other investors bullish on the company included Royce & Associates, Millennium Management, and Two Sigma Advisors.

Consequently, key hedge funds have jumped into Cabot Microelectronics Corporation (NASDAQ:CCMP) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the biggest position in Cabot Microelectronics Corporation (NASDAQ:CCMP). Marshall Wace LLP had $3.7 million invested in the company at the end of the quarter. Ernest Chow and Jonathan Howe’s Sensato Capital Management also initiated a $1.1 million position during the quarter. The following funds were also among the new CCMP investors: Thomas Bailard’s Bailard Inc, Mike Vranos’s Ellington, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Cabot Microelectronics Corporation (NASDAQ:CCMP) but similarly valued. We will take a look at Allegheny Technologies Incorporated (NYSE:ATI), Owens-Illinois Inc (NYSE:OI), CommVault Systems, Inc. (NASDAQ:CVLT), and Rexford Industrial Realty Inc (NYSE:REXR). All of these stocks’ market caps are similar to CCMP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ATI 24 270622 -3
OI 21 350797 4
CVLT 23 359636 1
REXR 18 284812 5
Average 21.5 316467 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $316 million. That figure was $281 million in CCMP’s case. Allegheny Technologies Incorporated (NYSE:ATI) is the most popular stock in this table. On the other hand Rexford Industrial Realty Inc (NYSE:REXR) is the least popular one with only 18 bullish hedge fund positions. Cabot Microelectronics Corporation (NASDAQ:CCMP) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on CCMP as the stock returned 32.1% and outperformed the market by an even larger margin.

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

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