How do we determine whether Canon Inc. (NYSE:CAJ) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is Canon Inc. (NYSE:CAJ) a buy here? The smart money is in a bullish mood. The number of bullish hedge fund bets increased by 2 lately. Our calculations also showed that CAJ isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to 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' 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_365194" align="aligncenter" width="450"] David E. Shaw of D.E. Shaw[/caption]
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. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to view the latest hedge fund action encompassing Canon Inc. (NYSE:CAJ).
How are hedge funds trading Canon Inc. (NYSE:CAJ)?
At Q3's end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in CAJ 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.
The largest stake in Canon Inc. (NYSE:CAJ) was held by Renaissance Technologies, which reported holding $59 million worth of stock at the end of September. It was followed by D E Shaw with a $15.5 million position. Other investors bullish on the company included LMR Partners, Arrowstreet Capital, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position LMR Partners allocated the biggest weight to Canon Inc. (NYSE:CAJ), around 0.75% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.05 percent of its 13F equity portfolio to CAJ.
Consequently, some big names were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the biggest position in Canon Inc. (NYSE:CAJ). Arrowstreet Capital had $2.9 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also made a $0.6 million investment in the stock during the quarter. The following funds were also among the new CAJ investors: Gavin Saitowitz and Cisco J. del Valle's Springbok Capital and Ken Griffin's Citadel Investment Group.
Let's go over hedge fund activity in other stocks similar to Canon Inc. (NYSE:CAJ). We will take a look at Motorola Solutions Inc (NYSE:MSI), Nokia Corporation (NYSE:NOK), Zimmer Biomet Holdings Inc (NYSE:ZBH), and Cintas Corporation (NASDAQ:CTAS). All of these stocks' market caps match CAJ's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MSI,33,932771,8 NOK,23,417397,-1 ZBH,44,1473799,2 CTAS,37,931398,10 Average,34.25,938841,4.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.25 hedge funds with bullish positions and the average amount invested in these stocks was $939 million. That figure was $95 million in CAJ's case. Zimmer Biomet Holdings Inc (NYSE:ZBH) is the most popular stock in this table. On the other hand Nokia Corporation (NYSE:NOK) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Canon Inc. (NYSE:CAJ) is even less popular than NOK. Hedge funds dodged a bullet by taking a bearish stance towards CAJ. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CAJ wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CAJ investors were disappointed as the stock returned 3.5% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.