In this article we will take a look at whether hedge funds think Carvana Co. (NYSE:CVNA) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is CVNA stock a buy or sell? Carvana Co. (NYSE:CVNA) was in 63 hedge funds' portfolios at the end of December. The all time high for this statistic was previously 57. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. CVNA has experienced an increase in enthusiasm from smart money lately. There were 53 hedge funds in our database with CVNA holdings at the end of September. Our calculations also showed that CVNA isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
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Do Hedge Funds Think CVNA Is A Good Stock To Buy Now?
At the end of December, a total of 63 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards CVNA over the last 22 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Tiger Global Management LLC held the most valuable stake in Carvana Co. (NYSE:CVNA), which was worth $1440.3 million at the end of the fourth quarter. On the second spot was Spruce House Investment Management which amassed $949.4 million worth of shares. D1 Capital Partners, CAS Investment Partners, and Lone Pine Capital 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 CAS Investment Partners allocated the biggest weight to Carvana Co. (NYSE:CVNA), around 42.54% of its 13F portfolio. Spruce House Investment Management is also relatively very bullish on the stock, earmarking 29.05 percent of its 13F equity portfolio to CVNA.
As aggregate interest increased, key money managers have jumped into Carvana Co. (NYSE:CVNA) headfirst. Lone Pine Capital, established the largest position in Carvana Co. (NYSE:CVNA). Lone Pine Capital had $586.5 million invested in the company at the end of the quarter. Tom Purcell and Marco Tablada's Alua Capital Management also initiated a $167.9 million position during the quarter. The following funds were also among the new CVNA investors: Christian Leone's Luxor Capital Group, Steve Cohen's Point72 Asset Management, and Paul Marshall and Ian Wace's Marshall Wace LLP.
Let's now review hedge fund activity in other stocks similar to Carvana Co. (NYSE:CVNA). These stocks are Baxter International Inc. (NYSE:BAX), CNOOC Limited (NYSE:CEO), Pinterest, Inc. (NYSE:PINS), Thomson Reuters Corporation (NYSE:TRI), Barrick Gold Corporation (NYSE:GOLD), Public Storage (NYSE:PSA), and Match Group, Inc. (NASDAQ:MTCH). This group of stocks' market values resemble CVNA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BAX,42,2801959,-9 CEO,13,197301,-1 PINS,95,5840185,15 TRI,23,360755,4 GOLD,53,1751874,1 PSA,31,1038430,14 MTCH,72,3780895,11 Average,47,2253057,5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 47 hedge funds with bullish positions and the average amount invested in these stocks was $2253 million. That figure was $7072 million in CVNA's case. Pinterest, Inc. (NYSE:PINS) is the most popular stock in this table. On the other hand CNOOC Limited (NYSE:CEO) is the least popular one with only 13 bullish hedge fund positions. Carvana Co. (NYSE:CVNA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CVNA is 70.5. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on CVNA as the stock returned 12.4% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.