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While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Curtiss-Wright Corp. (NYSE:CW).
Curtiss-Wright Corp. (NYSE:CW) shareholders have witnessed a decrease in activity from the world's largest hedge funds lately. Curtiss-Wright Corp. (NYSE:CW) was in 22 hedge funds' portfolios at the end of March. The all time high for this statistic is 26. Our calculations also showed that CW isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Minhua Zhang of Weld Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let's review the recent hedge fund action surrounding Curtiss-Wright Corp. (NYSE:CW).
Do Hedge Funds Think CW Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in CW over the last 23 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Israel Englander's Millennium Management has the largest position in Curtiss-Wright Corp. (NYSE:CW), worth close to $86.2 million, corresponding to 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is GAMCO Investors, led by Mario Gabelli, holding a $34.8 million position; 0.3% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism include Cliff Asness's AQR Capital Management, D. E. Shaw's D E Shaw and Ken Fisher's Fisher Asset Management. In terms of the portfolio weights assigned to each position Prospector Partners allocated the biggest weight to Curtiss-Wright Corp. (NYSE:CW), around 1.12% of its 13F portfolio. Value Holdings LP is also relatively very bullish on the stock, designating 0.49 percent of its 13F equity portfolio to CW.
Judging by the fact that Curtiss-Wright Corp. (NYSE:CW) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of fund managers that elected to cut their entire stakes heading into Q2. It's worth mentioning that Phill Gross and Robert Atchinson's Adage Capital Management dumped the largest investment of the "upper crust" of funds tracked by Insider Monkey, valued at an estimated $29.6 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also dropped its stock, about $10.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 1 funds heading into Q2.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Curtiss-Wright Corp. (NYSE:CW) but similarly valued. These stocks are Nomad Foods Limited (NYSE:NOMD), Lancaster Colony Corporation (NASDAQ:LANC), Nevro Corp (NYSE:NVRO), Xerox Holdings Corporation (NYSE:XRX), SelectQuote, Inc. (NYSE:SLQT), Magnite Inc. (NASDAQ:MGNI), and Allegro MicroSystems, Inc. (NASDAQ:ALGM). All of these stocks' market caps resemble CW's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NOMD,25,324331,-3 LANC,22,246061,3 NVRO,29,649613,-1 XRX,30,1044775,3 SLQT,17,185055,-2 MGNI,25,335746,-4 ALGM,17,90381,1 Average,23.6,410852,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.6 hedge funds with bullish positions and the average amount invested in these stocks was $411 million. That figure was $209 million in CW's case. Xerox Holdings Corporation (NYSE:XRX) is the most popular stock in this table. On the other hand SelectQuote, Inc. (NYSE:SLQT) is the least popular one with only 17 bullish hedge fund positions. Curtiss-Wright Corp. (NYSE:CW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CW is 48.6. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately CW wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CW investors were disappointed as the stock returned -2.1% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.