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In this article we are going to use hedge fund sentiment as a tool and determine whether CACI International Inc (NYSE:CACI) 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.
Is CACI a good stock to buy now? Prominent investors were cutting their exposure. The number of long hedge fund bets shrunk by 3 in recent months. CACI International Inc (NYSE:CACI) was in 31 hedge funds' portfolios at the end of September. The all time high for this statistic is 34. 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 for a quick look at the top 5 stocks). There were 34 hedge funds in our database with CACI positions at the end of the second quarter.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Steven Cohen of Point72 Asset Management
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. Now let's take a look at the new hedge fund action encompassing CACI International Inc (NYSE:CACI).
Do Hedge Funds Think CACI Is A Good Stock To Buy Now?
At third quarter's end, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards CACI over the last 21 quarters. With hedge funds' sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the biggest position in CACI International Inc (NYSE:CACI). Citadel Investment Group has a $104.2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Israel Englander of Millennium Management, with a $88.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions include Murray Stahl's Horizon Asset Management, Cliff Asness's AQR Capital Management and Phill Gross and Robert Atchinson's Adage Capital Management. In terms of the portfolio weights assigned to each position Akaris Global Partners allocated the biggest weight to CACI International Inc (NYSE:CACI), around 7.39% of its 13F portfolio. Lunia Capital is also relatively very bullish on the stock, dishing out 4.12 percent of its 13F equity portfolio to CACI.
Since CACI International Inc (NYSE:CACI) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of funds that elected to cut their entire stakes heading into Q4. Interestingly, Alexander Mitchell's Scopus Asset Management cut the largest investment of all the hedgies followed by Insider Monkey, comprising close to $19.5 million in stock, and Ken Grossman and Glen Schneider's SG Capital Management was right behind this move, as the fund dropped about $9.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 3 funds heading into Q4.
Let's also examine hedge fund activity in other stocks similar to CACI International Inc (NYSE:CACI). These stocks are Planet Fitness Inc (NYSE:PLNT), HUYA Inc. (NYSE:HUYA), Comerica Incorporated (NYSE:CMA), Elbit Systems Ltd. (NASDAQ:ESLT), Canopy Growth Corporation (NASDAQ:CGC), Woori Financial Group Inc. (NYSE:WF), and Vivint Solar Inc (NYSE:VSLR). This group of stocks' market caps match CACI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PLNT,45,1552569,1 HUYA,22,390686,1 CMA,30,453794,-6 ESLT,4,10024,0 CGC,9,19074,-2 WF,2,2940,-3 VSLR,23,736401,11 Average,19.3,452213,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.3 hedge funds with bullish positions and the average amount invested in these stocks was $452 million. That figure was $575 million in CACI's case. Planet Fitness Inc (NYSE:PLNT) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 2 bullish hedge fund positions. CACI International Inc (NYSE:CACI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CACI is 63.1. 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. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on CACI as the stock returned 16.2% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.