Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Covetrus, Inc. (NASDAQ:CVET) based on that data and determine whether they were really smart about the stock.
Is Covetrus, Inc. (NASDAQ:CVET) the right investment to pursue these days? Prominent investors were taking a bullish view. The number of bullish hedge fund positions improved by 2 recently. Covetrus, Inc. (NASDAQ:CVET) was in 24 hedge funds' portfolios at the end of June. The all time high for this statistics is 22. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CVET isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Michael Lowenstein of Kensico Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Keeping this in mind let's go over the fresh hedge fund action encompassing Covetrus, Inc. (NASDAQ:CVET).
What have hedge funds been doing with Covetrus, Inc. (NASDAQ:CVET)?
At Q2's end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in CVET a year ago. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in Covetrus, Inc. (NASDAQ:CVET) was held by Freshford Capital Management, which reported holding $104.6 million worth of stock at the end of September. It was followed by Adage Capital Management with a $19.7 million position. Other investors bullish on the company included Kensico Capital, Rock Springs Capital Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Freshford Capital Management allocated the biggest weight to Covetrus, Inc. (NASDAQ:CVET), around 19.07% of its 13F portfolio. One Fin Capital Management is also relatively very bullish on the stock, setting aside 3.74 percent of its 13F equity portfolio to CVET.
As industrywide interest jumped, some big names were breaking ground themselves. Adage Capital Management, managed by Phill Gross and Robert Atchinson, initiated the biggest position in Covetrus, Inc. (NASDAQ:CVET). Adage Capital Management had $19.7 million invested in the company at the end of the quarter. Michael Lowenstein's Kensico Capital also made a $16.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Zachary Miller's Parian Global Management, David MacKnight's One Fin Capital Management, and Renaissance Technologies.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Covetrus, Inc. (NASDAQ:CVET) but similarly valued. We will take a look at ChampionX Corporation (NYSE:CHX), First Interstate Bancsystem Inc (NASDAQ:FIBK), Uniqure NV (NASDAQ:QURE), Barnes Group Inc. (NYSE:B), Extended Stay America Inc (NASDAQ:STAY), Nu Skin Enterprises, Inc. (NYSE:NUS), and PJT Partners Inc (NYSE:PJT). This group of stocks' market valuations are similar to CVET's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CHX,30,452274,11 FIBK,12,20747,5 QURE,49,595039,5 B,19,39170,8 STAY,30,353720,12 NUS,25,240249,7 PJT,21,105078,-1 Average,26.6,258040,6.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.6 hedge funds with bullish positions and the average amount invested in these stocks was $258 million. That figure was $210 million in CVET's case. Uniqure NV (NASDAQ:QURE) is the most popular stock in this table. On the other hand First Interstate Bancsystem Inc (NASDAQ:FIBK) is the least popular one with only 12 bullish hedge fund positions. Covetrus, Inc. (NASDAQ:CVET) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CVET is 53.2. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. A small number of hedge funds were also right about betting on CVET as the stock returned 28.4% since the end of June (through September 25th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.