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Is CRL A Good Stock To Buy Now?

Asma UL Husna
·6 min read

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 Charles River Laboratories International Inc. (NYSE:CRL)? The smart money sentiment can provide an answer to this question.

Is CRL a good stock to buy now? Charles River Laboratories International Inc. (NYSE:CRL) has experienced a decrease in hedge fund interest recently. Charles River Laboratories International Inc. (NYSE:CRL) was in 36 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 41. There were 41 hedge funds in our database with CRL holdings at the end of June. Our calculations also showed that CRL 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). Video: Watch our video about the top 5 most popular hedge fund stocks.

At the moment there are several indicators stock market investors use to value stocks. A pair of the less utilized indicators are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the best fund managers can outpace the market by a significant margin (see the details here).

Lee Ainslie MAVERICK CAPITAL
Lee Ainslie MAVERICK CAPITAL

Lee Ainslie of Maverick 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. With all of this in mind let's take a gander at the key hedge fund action surrounding Charles River Laboratories International Inc. (NYSE:CRL).

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

Heading into the fourth quarter of 2020, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CRL over the last 21 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Marshall Wace LLP was the largest shareholder of Charles River Laboratories International Inc. (NYSE:CRL), with a stake worth $184.2 million reported as of the end of September. Trailing Marshall Wace LLP was Renaissance Technologies, which amassed a stake valued at $162.5 million. Ariel Investments, AQR Capital Management, and OZ 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 Tower House Partners allocated the biggest weight to Charles River Laboratories International Inc. (NYSE:CRL), around 25.47% of its 13F portfolio. Iron Triangle Partners is also relatively very bullish on the stock, earmarking 6.58 percent of its 13F equity portfolio to CRL.

Since Charles River Laboratories International Inc. (NYSE:CRL) has witnessed bearish sentiment from the aggregate hedge fund industry, it's safe to say that there exists a select few funds who sold off their full holdings by the end of the third quarter. Intriguingly, Ricky Sandler's Eminence Capital said goodbye to the largest stake of the 750 funds tracked by Insider Monkey, totaling close to $22.1 million in stock, and Anand Parekh's Alyeska Investment Group was right behind this move, as the fund sold off about $14 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 5 funds by the end of the third quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Charles River Laboratories International Inc. (NYSE:CRL) but similarly valued. We will take a look at Korea Electric Power Corporation (NYSE:KEP), Equity Lifestyle Properties, Inc. (NYSE:ELS), Gartner Inc (NYSE:IT), Nordson Corporation (NASDAQ:NDSN), Guardant Health, Inc. (NASDAQ:GH), Kinross Gold Corporation (NYSE:KGC), and Brookfield Property Partners LP (NASDAQ:BPY). This group of stocks' market values resemble CRL's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KEP,5,21191,2 ELS,28,461572,-3 IT,38,1451183,6 NDSN,21,63950,0 GH,41,1094278,5 KGC,29,799959,-1 BPY,8,18985,2 Average,24.3,558731,1.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.3 hedge funds with bullish positions and the average amount invested in these stocks was $559 million. That figure was $1241 million in CRL's case. Guardant Health, Inc. (NASDAQ:GH) is the most popular stock in this table. On the other hand Korea Electric Power Corporation (NYSE:KEP) is the least popular one with only 5 bullish hedge fund positions. Charles River Laboratories International Inc. (NYSE:CRL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CRL is 69.4. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 33.3% in 2020 through December 18th and beat the market again by 16.4 percentage points. Unfortunately CRL wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CRL were disappointed as the stock returned 9.9% since the end of September (through 12/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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