Were Hedge Funds Right About Selling Crown Holdings, Inc. (CCK)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtCrown Holdings, Inc. (NYSE:CCK) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is Crown Holdings, Inc. (NYSE:CCK) a buy here? The smart money was turning less bullish. The number of bullish hedge fund bets were cut by 2 recently. Our calculations also showed that CCK 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost gold prices. So, we are checking out this junior gold mining stock. 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. Now let’s check out the recent hedge fund action surrounding Crown Holdings, Inc. (NYSE:CCK).

How are hedge funds trading Crown Holdings, Inc. (NYSE:CCK)?

At Q1’s end, a total of 56 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CCK over the last 18 quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Among these funds, Lyrical Asset Management held the most valuable stake in Crown Holdings, Inc. (NYSE:CCK), which was worth $249.7 million at the end of the third quarter. On the second spot was Maverick Capital which amassed $202.4 million worth of shares. Rivulet Capital, Southpoint Capital Advisors, and Tensile Capital 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 Impactive Capital allocated the biggest weight to Crown Holdings, Inc. (NYSE:CCK), around 13.37% of its 13F portfolio. SAYA Management is also relatively very bullish on the stock, setting aside 10.04 percent of its 13F equity portfolio to CCK.

Judging by the fact that Crown Holdings, Inc. (NYSE:CCK) has experienced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of hedge funds that elected to cut their full holdings last quarter. Intriguingly, Clint Carlson’s Carlson Capital cut the largest stake of all the hedgies followed by Insider Monkey, comprising about $32.7 million in stock. Phill Gross and Robert Atchinson’s fund, Adage Capital Management, also cut its stock, about $28.4 million worth. These transactions are interesting, as total hedge fund interest dropped by 2 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Crown Holdings, Inc. (NYSE:CCK) but similarly valued. These stocks are Zscaler, Inc. (NASDAQ:ZS), Everest Re Group Ltd (NYSE:RE), MGM Growth Properties LLC (NYSE:MGP), and MongoDB, Inc. (NASDAQ:MDB). This group of stocks’ market valuations match CCK’s market valuation.

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 $538 million. That figure was $1217 million in CCK’s case. MongoDB, Inc. (NASDAQ:MDB) is the most popular stock in this table. On the other hand Zscaler, Inc. (NASDAQ:ZS) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Crown Holdings, Inc. (NYSE:CCK) is more popular among hedge funds. 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 gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. Unfortunately CCK wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CCK were disappointed as the stock returned 12.2% 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 in 2020.

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