There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don't cover. Because of Carl Icahn and other elite funds' exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Casey's General Stores, Inc. (NASDAQ:CASY).
Casey's General Stores, Inc. (NASDAQ:CASY) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 18 hedge funds' portfolios at the end of the first quarter of 2019. 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 BWX Technologies Inc (NYSE:BWXT), Avnet, Inc. (NASDAQ:AVT), and Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) to gather more data points.
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 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]
We're going to review the latest hedge fund action encompassing Casey's General Stores, Inc. (NASDAQ:CASY).
What does the smart money think about Casey's General Stores, Inc. (NASDAQ:CASY)?
At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2018. On the other hand, there were a total of 16 hedge funds with a bullish position in CASY a year ago. With hedge funds' capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
The largest stake in Casey's General Stores, Inc. (NASDAQ:CASY) was held by Lomas Capital Management, which reported holding $10.3 million worth of stock at the end of March. It was followed by GAMCO Investors with a $9 million position. Other investors bullish on the company included Citadel Investment Group, AQR Capital Management, and Renaissance Technologies.
Because Casey's General Stores, Inc. (NASDAQ:CASY) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there were a few money managers who sold off their positions entirely by the end of the third quarter. At the top of the heap, Israel Englander's Millennium Management cut the biggest position of all the hedgies tracked by Insider Monkey, totaling an estimated $12.2 million in stock, and Richard Driehaus's Driehaus Capital was right behind this move, as the fund sold off about $3.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to Casey's General Stores, Inc. (NASDAQ:CASY). These stocks are BWX Technologies Inc (NYSE:BWXT), Avnet, Inc. (NASDAQ:AVT), Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC), and LivaNova PLC (NASDAQ:LIVN). 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 BWXT,18,107854,-1 AVT,17,586463,-7 TKC,7,8792,-2 LIVN,20,262833,-2 Average,15.5,241486,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $241 million. That figure was $51 million in CASY's case. LivaNova PLC (NASDAQ:LIVN) is the most popular stock in this table. On the other hand Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) is the least popular one with only 7 bullish hedge fund positions. Casey's General Stores, Inc. (NASDAQ:CASY) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on CASY, though not to the same extent, as the stock returned 1.2% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.