There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don't cover. Because of Carl Icahn and other elite funds' exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Cardtronics plc (NASDAQ:CATM).
Cardtronics plc (NASDAQ:CATM) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 18 hedge funds' portfolios at the end of the fourth quarter of 2018. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as First Busey Corporation (NASDAQ:BUSE), Empresa Distribuidora y Comercializadora Norte Sociedad Anónima (NYSE:EDN), and LivePerson, Inc. (NASDAQ:LPSN) to gather more data points.
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 32 percentage points since May 2014 through March 12, 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 review the latest hedge fund action encompassing Cardtronics plc (NASDAQ:CATM).
How have hedgies been trading Cardtronics plc (NASDAQ:CATM)?
Heading into the first quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in CATM 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.
More specifically, Hudson Executive Capital was the largest shareholder of Cardtronics plc (NASDAQ:CATM), with a stake worth $211.3 million reported as of the end of December. Trailing Hudson Executive Capital was Renaissance Technologies, which amassed a stake valued at $19 million. D E Shaw, Two Sigma Advisors, and Winton Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Since Cardtronics plc (NASDAQ:CATM) has faced bearish sentiment from the smart money, we can see that there is a sect of funds that decided to sell off their positions entirely by the end of the third quarter. It's worth mentioning that Noam Gottesman's GLG Partners said goodbye to the biggest investment of the "upper crust" of funds watched by Insider Monkey, valued at an estimated $2.3 million in stock, and Michael Platt and William Reeves's BlueCrest Capital Mgmt. was right behind this move, as the fund dropped about $1.4 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks similar to Cardtronics plc (NASDAQ:CATM). We will take a look at First Busey Corporation (NASDAQ:BUSE), Empresa Distribuidora y Comercializadora Norte Sociedad Anónima (NYSE:EDN), LivePerson, Inc. (NASDAQ:LPSN), and National HealthCare Corporation (NYSE:NHC). This group of stocks' market values are similar to CATM's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BUSE,12,33593,-2 EDN,6,19637,-1 LPSN,17,131255,5 NHC,9,51474,-1 Average,11,58990,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $291 million in CATM's case. LivePerson, Inc. (NASDAQ:LPSN) is the most popular stock in this table. On the other hand Empresa Distribuidora y Comercializadora Norte Sociedad Anónima (NYSE:EDN) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Cardtronics plc (NASDAQ:CATM) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on CATM as the stock returned 32.3% 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.
Disclosure: None. This article was originally published at Insider Monkey.