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Is CRVL A Good Stock To Buy Now?

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Debasis Saha
·6 min read
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Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about CorVel Corporation (NASDAQ:CRVL).

Is CRVL a good stock to buy now? CorVel Corporation (NASDAQ:CRVL) was in 12 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 16. CRVL investors should pay attention to a decrease in enthusiasm from smart money in recent months. There were 15 hedge funds in our database with CRVL holdings at the end of June. Our calculations also showed that CRVL 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.

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 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 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.

Noam Gottesman GLG Partners
Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

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 let's go over the latest hedge fund action regarding CorVel Corporation (NASDAQ:CRVL).

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

At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the previous quarter. By comparison, 14 hedge funds held shares or bullish call options in CRVL a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Is CRVL A Good Stock To Buy?
Is CRVL A Good Stock To Buy?

Among these funds, Renaissance Technologies held the most valuable stake in CorVel Corporation (NASDAQ:CRVL), which was worth $94.9 million at the end of the third quarter. On the second spot was GLG Partners which amassed $4.9 million worth of shares. Arrowstreet Capital, Winton Capital Management, and Citadel Investment Group 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 Ancora Advisors allocated the biggest weight to CorVel Corporation (NASDAQ:CRVL), around 0.13% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.13 percent of its 13F equity portfolio to CRVL.

Due to the fact that CorVel Corporation (NASDAQ:CRVL) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there lies a certain "tier" of hedge funds that decided to sell off their full holdings by the end of the third quarter. Interestingly, Michael Gelband's ExodusPoint Capital dumped the largest position of the "upper crust" of funds watched by Insider Monkey, totaling close to $0.4 million in stock. Thomas Bailard's fund, Bailard Inc, also cut its stock, about $0.4 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 3 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 CorVel Corporation (NASDAQ:CRVL) but similarly valued. These stocks are GCP Applied Technologies Inc. (NYSE:GCP), Cytokinetics, Inc. (NASDAQ:CYTK), Maxar Technologies Inc (NYSE:MAXR), Skyline Champion Corporation (NYSE:SKY), Edgewell Personal Care Company (NYSE:EPC), Meritor Inc (NYSE:MTOR), and Heartland Express, Inc. (NASDAQ:HTLD). This group of stocks' market values are closest to CRVL's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GCP,21,375404,0 CYTK,26,429147,0 MAXR,17,150012,2 SKY,23,205908,0 EPC,21,188145,1 MTOR,17,192344,-1 HTLD,15,57175,2 Average,20,228305,0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $228 million. That figure was $120 million in CRVL's case. Cytokinetics, Inc. (NASDAQ:CYTK) is the most popular stock in this table. On the other hand Heartland Express, Inc. (NASDAQ:HTLD) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks CorVel Corporation (NASDAQ:CRVL) is even less popular than HTLD. Our overall hedge fund sentiment score for CRVL is 24.5. 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 32.9% in 2020 through December 8th but managed to beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on CRVL, though not to the same extent, as the stock returned 11.5% since the end of September (through December 8th) and outperformed the market as well.

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

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