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Were Hedge Funds Right About Piling Into Casey’s General Stores (CASY)?

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (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. Keeping this in mind, let’s analyze whether Casey’s General Stores, Inc. (NASDAQ:CASY) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.

Is Casey’s General Stores, Inc. (NASDAQ:CASY) a healthy stock for your portfolio? Prominent investors are becoming hopeful. The number of long hedge fund bets rose by 4 in recent months. Our calculations also showed that CASY isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

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 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 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 stocks that are in our short portfolio.

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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 go over the fresh hedge fund action surrounding Casey’s General Stores, Inc. (NASDAQ:CASY).

How have hedgies been trading Casey’s General Stores, Inc. (NASDAQ:CASY)?

Heading into the first quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the third quarter of 2019. On the other hand, there were a total of 18 hedge funds with a bullish position in CASY 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.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the most valuable position in Casey’s General Stores, Inc. (NASDAQ:CASY). AQR Capital Management has a $68.9 million position in the stock, comprising 0.1% of its 13F portfolio. On AQR Capital Management’s heels is Steve Cohen of Point72 Asset Management, with a $13.2 million position; 0.1% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions contain David Harding’s Winton Capital Management, Israel Englander’s Millennium Management and Donald Sussman’s Paloma Partners. In terms of the portfolio weights assigned to each position Prescott Group Capital Management allocated the biggest weight to Casey’s General Stores, Inc. (NASDAQ:CASY), around 0.55% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, designating 0.17 percent of its 13F equity portfolio to CASY.

Now, some big names have jumped into Casey’s General Stores, Inc. (NASDAQ:CASY) headfirst. Point72 Asset Management, managed by Steve Cohen, assembled the most valuable position in Casey’s General Stores, Inc. (NASDAQ:CASY). Point72 Asset Management had $13.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $9.5 million position during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group, Matthew Hulsizer’s PEAK6 Capital Management, and D. E. Shaw’s D E Shaw.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Casey’s General Stores, Inc. (NASDAQ:CASY) but similarly valued. We will take a look at Western Alliance Bancorporation (NYSE:WAL), AGCO Corporation (NYSE:AGCO), Hudson Pacific Properties Inc (NYSE:HPP), and Haemonetics Corporation (NYSE:HAE). All of these stocks’ market caps match CASY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WAL 32 246148 3
AGCO 28 302528 1
HPP 19 276484 -8
HAE 33 596381 8
Average 28 355385 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $355 million. That figure was $142 million in CASY’s case. Haemonetics Corporation (NYSE:HAE) is the most popular stock in this table. On the other hand Hudson Pacific Properties Inc (NYSE:HPP) is the least popular one with only 19 bullish hedge fund positions. Casey’s General Stores, Inc. (NASDAQ:CASY) is not the least popular stock in this group but hedge fund interest is still below average. 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 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on CASY as the stock returned -13.9% during the same time period and outperformed the market by an even larger margin.
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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