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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Casa Systems, Inc. (NASDAQ:CASA) for your portfolio? We'll look to this invaluable collective wisdom for the answer.
Is CASA a good stock to buy now? Casa Systems, Inc. (NASDAQ:CASA) was in 11 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 19. CASA investors should be aware of an increase in hedge fund sentiment in recent months. There were 9 hedge funds in our database with CASA holdings at the end of June. Our calculations also showed that CASA isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
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 66 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Donald Sussman of Paloma Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we're going to take a peek at the recent hedge fund action encompassing Casa Systems, Inc. (NASDAQ:CASA).
Do Hedge Funds Think CASA Is A Good Stock To Buy Now?
At Q3's end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CASA over the last 21 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Casa Systems, Inc. (NASDAQ:CASA) was held by Arrowstreet Capital, which reported holding $1.8 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $1.7 million position. Other investors bullish on the company included Two Sigma Advisors, D E Shaw, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Boardman Bay Capital Management allocated the biggest weight to Casa Systems, Inc. (NASDAQ:CASA), around 0.33% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to CASA.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. PDT Partners, managed by Peter Muller, assembled the biggest position in Casa Systems, Inc. (NASDAQ:CASA). PDT Partners had $0.2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also made a $0.1 million investment in the stock during the quarter. The only other fund with a brand new CASA position is Donald Sussman's Paloma Partners.
Let's now review hedge fund activity in other stocks similar to Casa Systems, Inc. (NASDAQ:CASA). We will take a look at One Liberty Properties, Inc. (NYSE:OLP), Daily Journal Corporation (NASDAQ:DJCO), Cutera, Inc. (NASDAQ:CUTR), American Superconductor Corporation (NASDAQ:AMSC), Zix Corporation (NASDAQ:ZIXI), New Senior Investment Group Inc (NYSE:SNR), and Tiziana Life Sciences plc (NASDAQ:TLSA). This group of stocks' market caps are similar to CASA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OLP,7,22139,-1 DJCO,2,651,0 CUTR,19,79300,4 AMSC,8,47220,-3 ZIXI,7,17203,-9 SNR,13,50201,1 TLSA,4,1035,3 Average,8.6,31107,-0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.6 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $7 million in CASA's case. Cutera, Inc. (NASDAQ:CUTR) is the most popular stock in this table. On the other hand Daily Journal Corporation (NASDAQ:DJCO) is the least popular one with only 2 bullish hedge fund positions. Casa Systems, Inc. (NASDAQ:CASA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CASA is 50.8. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on CASA as the stock returned 86.1% since the end of Q3 (through 12/8) 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.