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Is Carrier Global Corporation (CARR) A Good Stock To Buy?

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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to the smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Carrier Global Corporation (NYSE:CARR)? The smart money sentiment can provide an answer to this question.

Is CARR a good stock to buy? Carrier Global Corporation (NYSE:CARR) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 46 hedge funds' portfolios at the end of the third quarter of 2021. Our calculations also showed that CARR isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings). 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 The Bank of New York Mellon Corporation (NYSE:BK), T. Rowe Price Group, Inc. (NASDAQ:TROW), and Kimberly Clark Corporation (NYSE:KMB) to gather more data points.

Jeffrey Gates Gates Capital
Jeffrey Gates Gates Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we're going to take a look at the latest hedge fund action encompassing Carrier Global Corporation (NYSE:CARR).

Do Hedge Funds Think CARR Is A Good Stock To Buy Now?

At Q3's end, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CARR over the last 25 quarters. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Is CARR A Good Stock To Buy?
Is CARR A Good Stock To Buy?

Among these funds, AQR Capital Management held the most valuable stake in Carrier Global Corporation (NYSE:CARR), which was worth $183.1 million at the end of the third quarter. On the second spot was Gates Capital Management which amassed $165.8 million worth of shares. Renaissance Technologies, D E Shaw, and Fisher Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Voleon Capital allocated the biggest weight to Carrier Global Corporation (NYSE:CARR), around 28.19% of its 13F portfolio. DSAM Partners is also relatively very bullish on the stock, dishing out 5.9 percent of its 13F equity portfolio to CARR.

Judging by the fact that Carrier Global Corporation (NYSE:CARR) has witnessed a decline in interest from hedge fund managers, we can see that there exists a select few hedge funds who were dropping their full holdings last quarter. Interestingly, Matthew Stadelman's Diamond Hill Capital dumped the largest position of the 750 funds monitored by Insider Monkey, valued at close to $275.1 million in stock, and Ken Griffin's Citadel Investment Group was right behind this move, as the fund dumped about $125.5 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's now take a look at hedge fund activity in other stocks similar to Carrier Global Corporation (NYSE:CARR). These stocks are The Bank of New York Mellon Corporation (NYSE:BK), T. Rowe Price Group, Inc. (NASDAQ:TROW), Kimberly Clark Corporation (NYSE:KMB), L3Harris Technologies, Inc. (NASDAQ:LHX), Veeva Systems Inc (NYSE:VEEV), Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA), and Datadog, Inc. (NASDAQ:DDOG). This group of stocks' market caps are closest to CARR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BK,46,4657475,-6 TROW,35,471726,11 KMB,28,410445,-9 LHX,29,492448,-13 VEEV,44,1631737,0 BBVA,10,310429,1 DDOG,62,4934612,6 Average,36.3,1844125,-1.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.3 hedge funds with bullish positions and the average amount invested in these stocks was $1844 million. That figure was $1325 million in CARR's case. Datadog, Inc. (NASDAQ:DDOG) is the most popular stock in this table. On the other hand Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA) is the least popular one with only 10 bullish hedge fund positions. Carrier Global Corporation (NYSE:CARR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CARR is 66.2. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately CARR wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CARR were disappointed as the stock returned 4.8% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.