Were Hedge Funds Right About Piling Into Carvana Co. (CVNA)?

In this article we will take a look at whether hedge funds think Carvana Co. (NYSE:CVNA) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Carvana Co. (NYSE:CVNA) shareholders have witnessed an increase in enthusiasm from smart money in recent months. Carvana Co. (NYSE:CVNA) was in 64 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 63. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CVNA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we’re going to analyze the key hedge fund action surrounding Carvana Co. (NYSE:CVNA).

Do Hedge Funds Think CVNA Is A Good Stock To Buy Now?

At first quarter’s end, a total of 64 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CVNA over the last 23 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Chase Coleman’s Tiger Global Management LLC has the most valuable position in Carvana Co. (NYSE:CVNA), worth close to $1.5778 billion, comprising 3.6% of its total 13F portfolio. The second largest stake is held by Spruce House Investment Management, led by Zachary Sternberg and Benjamin Stein, holding a $1.04 billion position; 29.8% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish encompass Clifford A. Sosin’s CAS Investment Partners, Lone Pine Capital and Daniel Sundheim’s D1 Capital Partners. In terms of the portfolio weights assigned to each position CAS Investment Partners allocated the biggest weight to Carvana Co. (NYSE:CVNA), around 44.31% of its 13F portfolio. Antipodean Advisors is also relatively very bullish on the stock, designating 32.85 percent of its 13F equity portfolio to CVNA.

As industrywide interest jumped, specific money managers were leading the bulls’ herd. Third Point, managed by Dan Loeb, established the most outsized position in Carvana Co. (NYSE:CVNA). Third Point had $105 million invested in the company at the end of the quarter. Daniel S. Och’s OZ Management also made a $99.7 million investment in the stock during the quarter. The other funds with brand new CVNA positions are Scott Ferguson’s Sachem Head Capital, Edmond M. Safra’s EMS Capital, and Robert Boucai’s Newbrook Capital Advisors.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Carvana Co. (NYSE:CVNA) but similarly valued. We will take a look at America Movil SAB de CV (NYSE:AMX), TC Energy Corporation (NYSE:TRP), Barclays PLC (NYSE:BCS), Eni SpA (NYSE:E), Banco Bradesco SA (NYSE:BBD), Ambev SA (NYSE:ABEV), and Canadian Imperial Bank of Commerce (NYSE:CM). This group of stocks’ market caps match CVNA’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $214 million. That figure was $7536 million in CVNA’s case. TC Energy Corporation (NYSE:TRP) is the most popular stock in this table. On the other hand Eni SpA (NYSE:E) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Carvana Co. (NYSE:CVNA) is more popular among hedge funds. Our overall hedge fund sentiment score for CVNA is 86. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 25.8% in 2021 through August 6th but still managed to beat the market by 6.7 percentage points. Hedge funds were also right about betting on CVNA as the stock returned 31.7% since the end of March (through 8/6) 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.