Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Cosan Limited (NYSE:CZZ)? The smart money sentiment can provide an answer to this question.
Hedge fund interest in Cosan Limited (NYSE:CZZ) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Tandem Diabetes Care Inc (NASDAQ:TNDM), CarGurus, Inc. (NASDAQ:CARG), and White Mountains Insurance Group Ltd (NYSE:WTM) to gather more data points. Our calculations also showed that CZZ isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
At the moment there are tons of formulas shareholders can use to value their holdings. Two of the less utilized formulas are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the elite money managers can beat the S&P 500 by a healthy margin (see the details here).
[caption id="attachment_746893" align="aligncenter" width="473"] Paul Marshall of Marshall Wace[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's view the recent hedge fund action encompassing Cosan Limited (NYSE:CZZ).
How are hedge funds trading Cosan Limited (NYSE:CZZ)?
Heading into the fourth quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CZZ over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the biggest position in Cosan Limited (NYSE:CZZ), worth close to $130.9 million, amounting to 0.1% of its total 13F portfolio. On Renaissance Technologies's heels is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $35 million position; 0.1% of its 13F portfolio is allocated to the company. Other peers that are bullish include Israel Englander's Millennium Management, John Overdeck and David Siegel's Two Sigma Advisors and Jerome L. Simon's Lonestar Capital Management. In terms of the portfolio weights assigned to each position Lonestar Capital Management allocated the biggest weight to Cosan Limited (NYSE:CZZ), around 1.36% of its 13F portfolio. Qtron Investments is also relatively very bullish on the stock, earmarking 0.57 percent of its 13F equity portfolio to CZZ.
Because Cosan Limited (NYSE:CZZ) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of money managers that slashed their entire stakes by the end of the third quarter. It's worth mentioning that John W. Moon's Moon Capital sold off the biggest investment of all the hedgies watched by Insider Monkey, totaling close to $7.2 million in stock. Steve Cohen's fund, Point72 Asset Management, also said goodbye to its stock, about $4.4 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Cosan Limited (NYSE:CZZ) but similarly valued. These stocks are Tandem Diabetes Care Inc (NASDAQ:TNDM), CarGurus, Inc. (NASDAQ:CARG), White Mountains Insurance Group Ltd (NYSE:WTM), and Colfax Corporation (NYSE:CFX). This group of stocks' market caps are similar to CZZ's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TNDM,34,587351,1 CARG,21,813076,1 WTM,16,185765,-1 CFX,30,652861,3 Average,25.25,559763,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $560 million. That figure was $199 million in CZZ's case. Tandem Diabetes Care Inc (NASDAQ:TNDM) is the most popular stock in this table. On the other hand White Mountains Insurance Group Ltd (NYSE:WTM) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Cosan Limited (NYSE:CZZ) is even less popular than WTM. Hedge funds clearly dropped the ball on CZZ as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on CZZ as the stock returned 17.4% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.