The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don't follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That's why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at CBRE Group, Inc. (NYSE:CBRE) from the perspective of those elite funds.
Is CBRE Group, Inc. (NYSE:CBRE) a buy right now? The best stock pickers are becoming less confident. The number of long hedge fund positions retreated by 6 lately. Our calculations also showed that CBRE isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most investors, hedge funds are assumed to be slow, old financial vehicles of the past. While there are over 8000 funds in operation at the moment, We choose to focus on the bigwigs of this club, about 750 funds. These investment experts handle bulk of the smart money's total asset base, and by following their top investments, Insider Monkey has brought to light a number of investment strategies that have historically exceeded the S&P 500 index. Insider Monkey's flagship hedge fund strategy surpassed the S&P 500 index by around 5 percentage points annually since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a peek at the recent hedge fund action surrounding CBRE Group, Inc. (NYSE:CBRE).
How are hedge funds trading CBRE Group, Inc. (NYSE:CBRE)?
Heading into the third quarter of 2019, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from one quarter earlier. By comparison, 24 hedge funds held shares or bullish call options in CBRE a year ago. With hedgies' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in CBRE Group, Inc. (NYSE:CBRE) was held by ValueAct Capital, which reported holding $678.5 million worth of stock at the end of March. It was followed by Cantillon Capital Management with a $356.1 million position. Other investors bullish on the company included Ariel Investments, Citadel Investment Group, and Adage Capital Management.
Because CBRE Group, Inc. (NYSE:CBRE) has witnessed bearish sentiment from hedge fund managers, it's safe to say that there is a sect of fund managers that decided to sell off their full holdings heading into Q3. At the top of the heap, Israel Englander's Millennium Management dropped the largest position of the 750 funds tracked by Insider Monkey, worth an estimated $56.8 million in stock. Ken Heebner's fund, Capital Growth Management, also sold off its stock, about $39.6 million worth. These transactions are important to note, as total hedge fund interest dropped by 6 funds heading into Q3.
Let's also examine hedge fund activity in other stocks similar to CBRE Group, Inc. (NYSE:CBRE). These stocks are Lyft, Inc. (NASDAQ:LYFT), International Paper Company (NYSE:IP), Twilio Inc. (NYSE:TWLO), and Laboratory Corp. of America Holdings (NYSE:LH). This group of stocks' market valuations resemble CBRE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LYFT,37,1788821,-34 IP,31,256587,2 TWLO,63,2265236,4 LH,38,1528665,-1 Average,42.25,1459827,-7.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.25 hedge funds with bullish positions and the average amount invested in these stocks was $1460 million. That figure was $1294 million in CBRE's case. Twilio Inc. (NYSE:TWLO) is the most popular stock in this table. On the other hand International Paper Company (NYSE:IP) is the least popular one with only 31 bullish hedge fund positions. Compared to these stocks CBRE Group, Inc. (NYSE:CBRE) is even less popular than IP. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on CBRE, though not to the same extent, as the stock returned 3.3% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.