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Hedge Fund Sentiment Is Stagnant On Casey’s General Stores, Inc. (CASY)

Abigail Fisher

How do we determine whether Casey's General Stores, Inc. (NASDAQ:CASY) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Hedge fund interest in Casey's General Stores, Inc. (NASDAQ:CASY) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare CASY to other stocks including SolarWinds Corporation (NYSE:SWI), RealPage, Inc. (NASDAQ:RP), and Penumbra Inc (NYSE:PEN) to get a better sense of its popularity. Our calculations also showed that CASY isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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 market by 40 percentage points since May 2014 through May 30, 2019 (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.

CASY_oct2019

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to analyze the fresh hedge fund action regarding Casey's General Stores, Inc. (NASDAQ:CASY).

What have hedge funds been doing with Casey's General Stores, Inc. (NASDAQ:CASY)?

At Q2's end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in CASY over the last 16 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Sander Gerber Hudson Bay Capital Management

The largest stake in Casey's General Stores, Inc. (NASDAQ:CASY) was held by AQR Capital Management, which reported holding $30.4 million worth of stock at the end of March. It was followed by Maverick Capital with a $22.9 million position. Other investors bullish on the company included GLG Partners, GAMCO Investors, and Winton Capital Management.

Judging by the fact that Casey's General Stores, Inc. (NASDAQ:CASY) has faced bearish sentiment from the aggregate hedge fund industry, it's easy to see that there were a few hedgies that slashed their entire stakes heading into Q3. At the top of the heap, Daniel Lascano's Lomas Capital Management said goodbye to the biggest investment of the 750 funds followed by Insider Monkey, totaling about $10.3 million in stock. Steve Cohen's fund, Point72 Asset Management, also dropped its stock, about $3.4 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Casey's General Stores, Inc. (NASDAQ:CASY) but similarly valued. These stocks are SolarWinds Corporation (NYSE:SWI), RealPage, Inc. (NASDAQ:RP), Penumbra Inc (NYSE:PEN), and Grand Canyon Education Inc (NASDAQ:LOPE). This group of stocks' market values resemble CASY's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SWI,22,2526424,7 RP,33,584419,7 PEN,19,293942,-1 LOPE,23,121853,-3 Average,24.25,881660,2.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $882 million. That figure was $104 million in CASY's case. RealPage, Inc. (NASDAQ:RP) is the most popular stock in this table. On the other hand Penumbra Inc (NYSE:PEN) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Casey's General Stores, Inc. (NASDAQ:CASY) is even less popular than PEN. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on CASY, though not to the same extent, as the stock returned 3.5% during the third quarter and outperformed the market as well.

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

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