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2019 Review: Most Favored Hedge Fund Stocks vs. CACI International Inc (CACI)

Reymerlyn Martin

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds' top 3 stock picks returned 45.7% last year and beat the S&P 500 ETFs by more than 14 percentage points. That's a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

CACI International Inc (NYSE:CACI) has seen a decrease in support from the world's most elite money managers in recent months. Our calculations also showed that CACI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

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' 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_26388" align="aligncenter" width="600"] Lee Ainslie of Maverick Capital[/caption]

Lee Ainslie MAVERICK CAPITAL

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind let's check out the latest hedge fund action regarding CACI International Inc (NYSE:CACI).

What does smart money think about CACI International Inc (NYSE:CACI)?

At Q3's end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CACI over the last 17 quarters. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

The largest stake in CACI International Inc (NYSE:CACI) was held by Citadel Investment Group, which reported holding $129.6 million worth of stock at the end of September. It was followed by AQR Capital Management with a $90.8 million position. Other investors bullish on the company included Horizon Asset Management, GLG Partners, and Millennium Management. In terms of the portfolio weights assigned to each position Horizon Asset Management allocated the biggest weight to CACI International Inc (NYSE:CACI), around 2.66% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, setting aside 1.8 percent of its 13F equity portfolio to CACI.

Due to the fact that CACI International Inc (NYSE:CACI) has experienced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there was a specific group of money managers who were dropping their positions entirely heading into Q4. Intriguingly, Matthew Tewksbury's Stevens Capital Management cut the biggest investment of all the hedgies tracked by Insider Monkey, totaling an estimated $4.7 million in stock. Michael Gelband's fund, ExodusPoint Capital, also cut its stock, about $2.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds heading into Q4.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as CACI International Inc (NYSE:CACI) but similarly valued. These stocks are Herbalife Nutrition Ltd. (NYSE:HLF), SolarWinds Corporation (NYSE:SWI), Medidata Solutions Inc (NASDAQ:MDSO), and Tata Motors Limited (NYSE:TTM). This group of stocks' market values are similar to CACI's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HLF,22,2655964,-5 SWI,13,2504777,-9 MDSO,23,585095,-7 TTM,7,93303,-4 Average,16.25,1459785,-6.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $1460 million. That figure was $522 million in CACI's case. Medidata Solutions Inc (NASDAQ:MDSO) is the most popular stock in this table. On the other hand Tata Motors Limited (NYSE:TTM) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks CACI International Inc (NYSE:CACI) is more popular among hedge funds. 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. Hedge funds were also right about betting on CACI as the stock returned 73.6% in 2019 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. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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