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With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Cross Country Healthcare, Inc. (NASDAQ:CCRN).
Is CCRN a good stock to buy now? Prominent investors were becoming more confident. The number of bullish hedge fund bets advanced by 3 recently. Cross Country Healthcare, Inc. (NASDAQ:CCRN) was in 15 hedge funds' portfolios at the end of September. The all time high for this statistic is 20. Our calculations also showed that CCRN 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). There were 12 hedge funds in our database with CCRN holdings at the end of June.
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.
Michael Gelband of ExodusPoint Capital
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. Now we're going to analyze the key hedge fund action surrounding Cross Country Healthcare, Inc. (NASDAQ:CCRN).
Do Hedge Funds Think CCRN Is A Good Stock To Buy Now?
At Q3's end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in CCRN a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in Cross Country Healthcare, Inc. (NASDAQ:CCRN), which was worth $11.1 million at the end of the third quarter. On the second spot was Sio Capital which amassed $2.6 million worth of shares. Arrowstreet Capital, D E Shaw, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Cross Country Healthcare, Inc. (NASDAQ:CCRN), around 0.9% of its 13F portfolio. Sio Capital is also relatively very bullish on the stock, setting aside 0.52 percent of its 13F equity portfolio to CCRN.
As one would reasonably expect, some big names have been driving this bullishness. Sio Capital, managed by Michael Castor, assembled the most valuable position in Cross Country Healthcare, Inc. (NASDAQ:CCRN). Sio Capital had $2.6 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also made a $0.4 million investment in the stock during the quarter. The only other fund with a new position in the stock is Michael Gelband's ExodusPoint Capital.
Let's check out hedge fund activity in other stocks similar to Cross Country Healthcare, Inc. (NASDAQ:CCRN). These stocks are The Joint Corp. (NASDAQ:JYNT), Global Water Resources, Inc. (NASDAQ:GWRS), Calithera Biosciences Inc (NASDAQ:CALA), Fiesta Restaurant Group Inc (NASDAQ:FRGI), Evelo Biosciences, Inc. (NASDAQ:EVLO), HOOKIPA Pharma Inc. (NASDAQ:HOOK), and Rimini Street, Inc. (NASDAQ:RMNI). This group of stocks' market caps are closest to CCRN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JYNT,17,69411,1 GWRS,4,5120,1 CALA,14,46957,0 FRGI,14,100160,0 EVLO,3,7804,-3 HOOK,7,34432,-2 RMNI,9,99016,1 Average,9.7,51843,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.7 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $23 million in CCRN's case. The Joint Corp. (NASDAQ:JYNT) is the most popular stock in this table. On the other hand Evelo Biosciences, Inc. (NASDAQ:EVLO) is the least popular one with only 3 bullish hedge fund positions. Cross Country Healthcare, Inc. (NASDAQ:CCRN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CCRN is 73.4. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on CCRN as the stock returned 43.8% since the end of Q3 (through 12/14) 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.