Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors' money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Camping World Holdings, Inc. (NYSE:CWH) investors should pay attention to a decrease in enthusiasm from smart money recently. Our calculations also showed that CWH isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to take a peek at the latest hedge fund action surrounding Camping World Holdings, Inc. (NYSE:CWH).
Hedge fund activity in Camping World Holdings, Inc. (NYSE:CWH)
Heading into the second quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the fourth quarter of 2018. By comparison, 19 hedge funds held shares or bullish call options in CWH 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, David Abrams's Abrams Capital Management has the biggest position in Camping World Holdings, Inc. (NYSE:CWH), worth close to $54.9 million, corresponding to 1.5% of its total 13F portfolio. On Abrams Capital Management's heels is Coliseum Capital, led by Christopher Shackelton and Adam Gray, holding a $13 million position; 4.7% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that are bullish contain Chuck Royce's Royce & Associates, Ken Griffin's Citadel Investment Group and Julian Robertson's Tiger Management.
Seeing as Camping World Holdings, Inc. (NYSE:CWH) has witnessed bearish sentiment from the aggregate hedge fund industry, we can see that there were a few funds that elected to cut their full holdings heading into Q3. It's worth mentioning that Thomas Ellis and Todd Hammer's North Run Capital dropped the biggest stake of the "upper crust" of funds monitored by Insider Monkey, worth an estimated $3.3 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund sold off about $2.9 million worth. These moves are interesting, as aggregate hedge fund interest fell by 1 funds heading into Q3.
Let's now review hedge fund activity in other stocks similar to Camping World Holdings, Inc. (NYSE:CWH). We will take a look at The Marcus Corporation (NYSE:MCS), US Ecology Inc. (NASDAQ:ECOL), Nabors Industries Ltd. (NYSE:NBR), and TTM Technologies, Inc. (NASDAQ:TTMI). This group of stocks' market valuations resemble CWH's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MCS,16,97320,5 ECOL,9,14502,-2 NBR,30,175806,-2 TTMI,13,43308,-2 Average,17,82734,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $104 million in CWH's case. Nabors Industries Ltd. (NYSE:NBR) is the most popular stock in this table. On the other hand US Ecology Inc. (NASDAQ:ECOL) is the least popular one with only 9 bullish hedge fund positions. Camping World Holdings, Inc. (NYSE:CWH) is not the least popular stock in this group but hedge fund interest is still below average. 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately CWH wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CWH investors were disappointed as the stock returned -9.7% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.