Before we spend days researching a stock idea we'd like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 13.5% in the fourth quarter. Seven out of 11 industry groups in the S&P 500 Index were down more than 20% from their 52-week highs at the trough of the stock market crash. The average return of a randomly picked stock in the index was even worse. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 15 most popular S&P 500 stocks among hedge funds not only recouped their Q4 losses but also outperformed the index by more than 3 percentage points. In this article, we will take a look at what hedge funds think about Caesarstone Ltd. (NASDAQ:CSTE).
Is Caesarstone Ltd. (NASDAQ:CSTE) a superb stock to buy now? The best stock pickers are becoming more confident. The number of bullish hedge fund positions advanced by 3 recently. Our calculations also showed that CSTE isn't among the 30 most popular stocks among hedge funds. CSTE was in 6 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 3 hedge funds in our database with CSTE positions at the end of the previous quarter.
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 flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let's review the new hedge fund action encompassing Caesarstone Ltd. (NASDAQ:CSTE).
What have hedge funds been doing with Caesarstone Ltd. (NASDAQ:CSTE)?
At the end of the fourth quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 100% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in CSTE a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Hawk Ridge Management was the largest shareholder of Caesarstone Ltd. (NASDAQ:CSTE), with a stake worth $10.5 million reported as of the end of December. Trailing Hawk Ridge Management was Two Sigma Advisors, which amassed a stake valued at $2.6 million. D E Shaw, PEAK6 Capital Management, and Point72 Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
Now, key hedge funds have been driving this bullishness. Hawk Ridge Management, managed by David Brown, assembled the largest position in Caesarstone Ltd. (NASDAQ:CSTE). Hawk Ridge Management had $10.5 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also initiated a $1.1 million position during the quarter. The other funds with brand new CSTE positions are Matthew Hulsizer's PEAK6 Capital Management and Ken Griffin's Citadel Investment Group.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Caesarstone Ltd. (NASDAQ:CSTE) but similarly valued. These stocks are Nicolet Bankshares Inc. (NASDAQ:NCBS), FRP Holdings Inc (NASDAQ:FRPH), LeMaitre Vascular Inc (NASDAQ:LMAT), and BP Prudhoe Bay Royalty Trust (NYSE:BPT). This group of stocks' market values are similar to CSTE's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NCBS,3,3172,-1 FRPH,7,44007,0 LMAT,6,10434,-2 BPT,4,4888,0 Average,5,15625,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $15 million in CSTE's case. FRP Holdings Inc (NASDAQ:FRPH) is the most popular stock in this table. On the other hand Nicolet Bankshares Inc. (NASDAQ:NCBS) is the least popular one with only 3 bullish hedge fund positions. Caesarstone Ltd. (NASDAQ:CSTE) is not the most popular stock in this group but hedge fund interest is still above average. 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately CSTE wasn't nearly as popular as these 15 stock and hedge funds that were betting on CSTE were disappointed as the stock returned 11.8% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.