In this article you are going to find out whether hedge funds think Carnival Corporation & Plc (NYSE:CCL) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Carnival Corporation & Plc (NYSE:CCL) was in 31 hedge funds' portfolios at the end of March. CCL has experienced a decrease in hedge fund interest recently. There were 34 hedge funds in our database with CCL holdings at the end of the previous quarter. Our calculations also showed that CCL isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). 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 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 S&P 500 ETFs by 51 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 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.
[caption id="attachment_695350" align="aligncenter" width="399"] Anna Nikolayevsky of Axel Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to analyze the latest hedge fund action regarding Carnival Corporation & Plc (NYSE:CCL).
What does smart money think about Carnival Corporation & Plc (NYSE:CCL)?
At the end of the first quarter, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CCL over the last 18 quarters. With the smart money's capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Light Street Capital, managed by Glen Kacher, holds the number one position in Carnival Corporation & Plc (NYSE:CCL). Light Street Capital has a $25.3 million position in the stock, comprising 1.3% of its 13F portfolio. Sitting at the No. 2 spot is D. E. Shaw of D E Shaw, with a $24.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish include Cliff Asness's AQR Capital Management, and Richard S. Pzena's Pzena Investment Management. In terms of the portfolio weights assigned to each position Axel Capital Management allocated the biggest weight to Carnival Corporation & Plc (NYSE:CCL), around 3.44% of its 13F portfolio. Broad Peak Investment Holdings is also relatively very bullish on the stock, designating 1.33 percent of its 13F equity portfolio to CCL.
Judging by the fact that Carnival Corporation & Plc (NYSE:CCL) has faced declining sentiment from the aggregate hedge fund industry, we can see that there is a sect of funds that elected to cut their entire stakes in the first quarter. Intriguingly, Greg Poole's Echo Street Capital Management dumped the biggest position of the 750 funds monitored by Insider Monkey, comprising close to $89.3 million in stock, and Leon Cooperman's Omega Advisors was right behind this move, as the fund sold off about $38.3 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 3 funds in the first quarter.
Let's also examine hedge fund activity in other stocks similar to Carnival Corporation & Plc (NYSE:CCL). We will take a look at Qorvo Inc (NASDAQ:QRVO), Varian Medical Systems, Inc. (NYSE:VAR), Suzano S.A. (NYSE:SUZ), and Hologic, Inc. (NASDAQ:HOLX). All of these stocks' market caps resemble CCL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QRVO,39,1165693,-6 VAR,25,439921,-5 SUZ,3,27219,-1 HOLX,41,866159,0 Average,27,624748,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $625 million. That figure was $146 million in CCL's case. Hologic, Inc. (NASDAQ:HOLX) is the most popular stock in this table. On the other hand Suzano S.A. (NYSE:SUZ) is the least popular one with only 3 bullish hedge fund positions. Carnival Corporation & Plc (NYSE:CCL) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on CCL, though not to the same extent, as the stock returned 19.5% during the first two months of the second quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.