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Is CBOE A Good Stock To Buy According To Hedge Funds?

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Debasis Saha
·6 min read
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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded CBOE Global Markets Inc (NASDAQ:CBOE) based on those filings.

Is CBOE a good stock to buy? CBOE Global Markets Inc (NASDAQ:CBOE) investors should pay attention to an increase in enthusiasm from smart money lately. CBOE Global Markets Inc (NASDAQ:CBOE) was in 33 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 38. Our calculations also showed that CBOE 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.

According to most shareholders, hedge funds are seen as underperforming, old investment vehicles of yesteryear. While there are more than 8000 funds in operation at present, Our experts choose to focus on the masters of this group, about 850 funds. Most estimates calculate that this group of people handle the majority of all hedge funds' total capital, and by monitoring their first-class equity investments, Insider Monkey has unearthed many investment strategies that have historically beaten the broader indices. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

David Brown Hawk Ridge Partners
David Brown Hawk Ridge Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Now we're going to take a look at the latest hedge fund action surrounding CBOE Global Markets Inc (NASDAQ:CBOE).

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

At the end of September, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards CBOE over the last 21 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CBOE A Good Stock To Buy?
Is CBOE A Good Stock To Buy?

The largest stake in CBOE Global Markets Inc (NASDAQ:CBOE) was held by Renaissance Technologies, which reported holding $325.5 million worth of stock at the end of September. It was followed by D E Shaw with a $163.3 million position. Other investors bullish on the company included GLG Partners, Hawk Ridge Management, and Horizon Asset Management. In terms of the portfolio weights assigned to each position Truvvo Partners allocated the biggest weight to CBOE Global Markets Inc (NASDAQ:CBOE), around 10.22% of its 13F portfolio. Hawk Ridge Management is also relatively very bullish on the stock, designating 3.75 percent of its 13F equity portfolio to CBOE.

With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Hawk Ridge Management, managed by David Brown, initiated the largest position in CBOE Global Markets Inc (NASDAQ:CBOE). Hawk Ridge Management had $44 million invested in the company at the end of the quarter. Brandon Haley's Holocene Advisors also made a $28.1 million investment in the stock during the quarter. The following funds were also among the new CBOE investors: Steve Cohen's Point72 Asset Management, Nick Thakore's Diametric Capital, and Gavin Saitowitz and Cisco J. del Valle's Prelude Capital (previously Springbok Capital).

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as CBOE Global Markets Inc (NASDAQ:CBOE) but similarly valued. We will take a look at Zynga Inc (NASDAQ:ZNGA), Sunrun Inc (NASDAQ:RUN), Pegasystems Inc. (NASDAQ:PEGA), NetApp Inc. (NASDAQ:NTAP), Lamb Weston Holdings, Inc. (NYSE:LW), UDR, Inc. (NYSE:UDR), and Brookfield Renewable Partners L.P. (NYSE:BEP). All of these stocks' market caps match CBOE's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ZNGA,48,959687,-4 RUN,29,3270810,8 PEGA,32,1866556,4 NTAP,31,429263,6 LW,27,204303,2 UDR,26,353647,-3 BEP,17,250013,12 Average,30,1047754,3.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $1048 million. That figure was $873 million in CBOE's case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand Brookfield Renewable Partners L.P. (NYSE:BEP) is the least popular one with only 17 bullish hedge fund positions. CBOE Global Markets Inc (NASDAQ:CBOE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CBOE is 57.9. 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 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 33.3% in 2020 through December 18th and beat the market again by 16.4 percentage points. Unfortunately CBOE wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CBOE were disappointed as the stock returned 3.9% since the end of September (through 12/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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