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Is Casey’s General Stores, Inc. (CASY) Going to Burn These Hedge Funds?

Abigail Fisher

Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren't very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds' top 30 stock picks easily bested the broader market, at 6.7% compared to 2.6%, despite there being a few duds in there like Facebook (even their collective wisdom isn't perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.

Casey's General Stores, Inc. (NASDAQ:CASY) was in 18 hedge funds' portfolios at the end of the third quarter of 2018. CASY shareholders have witnessed an increase in enthusiasm from smart money recently. There were 17 hedge funds in our database with CASY positions at the end of the previous quarter. Our calculations also showed that CASY isn't among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_375529" align="aligncenter" width="450"] Mario Gabelli of GAMCO Investors[/caption]

Mario Gabelli of GAMCO Investors

We're going to review the latest hedge fund action surrounding Casey's General Stores, Inc. (NASDAQ:CASY).

How are hedge funds trading Casey's General Stores, Inc. (NASDAQ:CASY)?

At Q3's end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the second quarter of 2018. On the other hand, there were a total of 21 hedge funds with a bullish position in CASY at the beginning of this year. With hedgies' capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

CASY_dec2018

More specifically, Citadel Investment Group was the largest shareholder of Casey's General Stores, Inc. (NASDAQ:CASY), with a stake worth $27.2 million reported as of the end of September. Trailing Citadel Investment Group was Arrowstreet Capital, which amassed a stake valued at $16.4 million. GAMCO Investors, Marshall Wace LLP, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.

Now, some big names were leading the bulls' herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the biggest position in Casey's General Stores, Inc. (NASDAQ:CASY). Marshall Wace LLP had $8.4 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also made a $7.1 million investment in the stock during the quarter. The other funds with brand new CASY positions are Mike Vranos's Ellington, Matthew Tewksbury's Stevens Capital Management, and Richard Driehaus's Driehaus Capital.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Casey's General Stores, Inc. (NASDAQ:CASY) but similarly valued. We will take a look at Choice Hotels International, Inc. (NYSE:CHH), Cinemark Holdings, Inc. (NYSE:CNK), Arris International plc (NASDAQ:ARRS), and Pinnacle Financial Partners, Inc. (NASDAQ:PNFP). This group of stocks' market values resemble CASY's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CHH,18,276727,1 CNK,19,248506,4 ARRS,23,645342,-2 PNFP,13,130971,3 Average,18.25,325387,1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $325 million. That figure was $89 million in CASY's case. Arris International plc (NASDAQ:ARRS) is the most popular stock in this table. On the other hand Pinnacle Financial Partners, Inc.(NASDAQ:PNFP) is the least popular one with only 13 bullish hedge fund positions. Casey's General Stores, Inc. (NASDAQ:CASY) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. In this regard ARRS might be a better candidate to consider a long position.

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

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