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CoStar Group Inc (CSGP): Are Hedge Funds Right About This Stock?

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  • CSGP

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 873 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th. In this article we look at what those investors think of CoStar Group Inc (NASDAQ:CSGP).

Is CoStar Group Inc (NASDAQ:CSGP) undervalued? Money managers were getting more optimistic. The number of long hedge fund bets went up by 6 lately. CoStar Group Inc (NASDAQ:CSGP) was in 49 hedge funds' portfolios at the end of June. The all time high for this statistic is 55. Our calculations also showed that CSGP isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Charles Akre Akre Capital Management
Charles Akre Akre Capital Management

Charles Akre of Akre Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let's take a peek at the latest hedge fund action surrounding CoStar Group Inc (NASDAQ:CSGP).

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

At Q2's end, a total of 49 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the first quarter of 2020. By comparison, 50 hedge funds held shares or bullish call options in CSGP a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Among these funds, Akre Capital Management held the most valuable stake in CoStar Group Inc (NASDAQ:CSGP), which was worth $809 million at the end of the second quarter. On the second spot was Third Point which amassed $469.7 million worth of shares. Alkeon Capital Management, Bares Capital Management, and Millennium Management 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 Lakehouse Capital allocated the biggest weight to CoStar Group Inc (NASDAQ:CSGP), around 7.44% of its 13F portfolio. Wildcat Capital Management is also relatively very bullish on the stock, dishing out 6.14 percent of its 13F equity portfolio to CSGP.

With a general bullishness amongst the heavyweights, key money managers have jumped into CoStar Group Inc (NASDAQ:CSGP) headfirst. Holocene Advisors, managed by Brandon Haley, created the most outsized position in CoStar Group Inc (NASDAQ:CSGP). Holocene Advisors had $61 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $43.1 million position during the quarter. The other funds with brand new CSGP positions are Jeffrey Hoffner's Engle Capital, Robert Joseph Caruso's Select Equity Group, and D. E. Shaw's D E Shaw.

Let's now review hedge fund activity in other stocks similar to CoStar Group Inc (NASDAQ:CSGP). We will take a look at Corteva, Inc. (NYSE:CTVA), D.R. Horton, Inc. (NYSE:DHI), The Williams Companies, Inc. (NYSE:WMB), Mettler-Toledo International Inc. (NYSE:MTD), ArcelorMittal (NYSE:MT), V.F. Corporation (NYSE:VFC), and AutoZone, Inc. (NYSE:AZO). This group of stocks' market values are closest to CSGP's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CTVA,34,1283913,-1 DHI,45,1886955,-5 WMB,39,551010,5 MTD,35,1267774,8 MT,22,1044502,1 VFC,32,1005658,1 AZO,34,545700,0 Average,34.4,1083645,1.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.4 hedge funds with bullish positions and the average amount invested in these stocks was $1084 million. That figure was $2817 million in CSGP's case. D.R. Horton, Inc. (NYSE:DHI) is the most popular stock in this table. On the other hand ArcelorMittal (NYSE:MT) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks CoStar Group Inc (NASDAQ:CSGP) is more popular among hedge funds. Our overall hedge fund sentiment score for CSGP is 86.7. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 through November 5th and still beat the market by 3.1 percentage points. Unfortunately CSGP wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CSGP were disappointed as the stock returned 0.5% since the end of the second quarter (through 11/5) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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