In this article we are going to use hedge fund sentiment as a tool and determine whether Crescent Capital BDC, Inc. (NASDAQ:CCAP) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Crescent Capital BDC, Inc. (NASDAQ:CCAP) investors should pay attention to an increase in support from the world’s most elite money managers of late. Crescent Capital BDC, Inc. (NASDAQ:CCAP) was in 6 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 5. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 4 hedge funds in our database with CCAP positions at the end of the second quarter. Our calculations also showed that CCAP isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 66 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, 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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind we’re going to take a look at the new hedge fund action surrounding Crescent Capital BDC, Inc. (NASDAQ:CCAP).
How are hedge funds trading Crescent Capital BDC, Inc. (NASDAQ:CCAP)?
At third quarter’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in CCAP 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.
More specifically, Fairfax Financial Holdings was the largest shareholder of Crescent Capital BDC, Inc. (NASDAQ:CCAP), with a stake worth $48.3 million reported as of the end of September. Trailing Fairfax Financial Holdings was Bulldog Investors, which amassed a stake valued at $1.8 million. Millennium Management, LMR Partners, and Birch Grove 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 Fairfax Financial Holdings allocated the biggest weight to Crescent Capital BDC, Inc. (NASDAQ:CCAP), around 2.73% of its 13F portfolio. Bulldog Investors is also relatively very bullish on the stock, setting aside 0.59 percent of its 13F equity portfolio to CCAP.
As one would reasonably expect, specific money managers were leading the bulls’ herd. Birch Grove Capital, managed by Jonathan Berger, assembled the most valuable position in Crescent Capital BDC, Inc. (NASDAQ:CCAP). Birch Grove Capital had $0.4 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.2 million investment in the stock during the quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Crescent Capital BDC, Inc. (NASDAQ:CCAP) but similarly valued. We will take a look at PDL BioPharma Inc. (NASDAQ:PDLI), Interface, Inc. (NASDAQ:TILE), Dorchester Minerals LP (NASDAQ:DMLP), Chatham Lodging Trust (NYSE:CLDT), Village Super Market, Inc. (NASDAQ:VLGEA), Corporacion America Airports SA (NYSE:CAAP), and Cellular Biomedicine Group, Inc. (NASDAQ:CBMG). This group of stocks’ market caps match CCAP’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $52 million in CCAP’s case. Interface, Inc. (NASDAQ:TILE) is the most popular stock in this table. On the other hand Corporacion America Airports SA (NYSE:CAAP) is the least popular one with only 4 bullish hedge fund positions. Crescent Capital BDC, Inc. (NASDAQ:CCAP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CCAP is 44.7. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 percentage points. These stocks gained 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately CCAP wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CCAP investors were disappointed as the stock returned 7.4% since the end of September (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 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.