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Were Hedge Funds Right About Warming Up To Carriage Services, Inc. (CSV)?

The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Carriage Services, Inc. (NYSE:CSV) from the perspective of those elite funds.

Is Carriage Services, Inc. (NYSE:CSV) a healthy stock for your portfolio? Prominent investors are in a bullish mood. The number of long hedge fund positions advanced by 1 lately. Our calculations also showed that CSV isn’t among the 30 most popular stocks among hedge funds (see the video below). CSV was in 9 hedge funds’ portfolios at the end of June. There were 8 hedge funds in our database with CSV positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

CSV_oct2019

In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources  like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Now, we’re going to go over the latest hedge fund action regarding Carriage Services, Inc. (NYSE:CSV).

How are hedge funds trading Carriage Services, Inc. (NYSE:CSV)?

At the end of the second quarter, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in CSV a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

TUDOR INVESTMENT CORP

The largest stake in Carriage Services, Inc. (NYSE:CSV) was held by Renaissance Technologies, which reported holding $23.9 million worth of stock at the end of March. It was followed by Arrowstreet Capital with a $3.9 million position. Other investors bullish on the company included Millennium Management, Two Sigma Advisors, and D E Shaw.

Consequently, some big names have been driving this bullishness. Tudor Investment Corp, managed by Paul Tudor Jones, assembled the largest position in Carriage Services, Inc. (NYSE:CSV). Tudor Investment Corp had $0.5 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $0.3 million position during the quarter.

Let’s also examine hedge fund activity in other stocks similar to Carriage Services, Inc. (NYSE:CSV). We will take a look at ImmunoGen, Inc. (NASDAQ:IMGN), Noodles & Co (NASDAQ:NDLS), Cross Country Healthcare, Inc. (NASDAQ:CCRN), and Business First Bancshares, Inc. (NASDAQ:BFST). This group of stocks’ market values resemble CSV’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IMGN 15 61037 -1
NDLS 12 89582 -5
CCRN 8 23148 0
BFST 1 16390 0
Average 9 47539 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $33 million in CSV’s case. ImmunoGen, Inc. (NASDAQ:IMGN) is the most popular stock in this table. On the other hand Business First Bancshares, Inc. (NASDAQ:BFST) is the least popular one with only 1 bullish hedge fund positions. Carriage Services, Inc. (NYSE:CSV) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on CSV as the stock returned 7.9% during the same time frame and outperformed the market by an even larger margin.

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

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