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We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Copart, Inc. (NASDAQ:CPRT).
Copart, Inc. (NASDAQ:CPRT) was in 42 hedge funds' portfolios at the end of September. The all time high for this statistic is 60. CPRT has experienced a decrease in activity from the world's largest hedge funds recently. There were 44 hedge funds in our database with CPRT positions at the end of the second quarter. Our calculations also showed that CPRT isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Ray Dalio of Bridgewater Associates
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. With all of this in mind we're going to analyze the key hedge fund action encompassing Copart, Inc. (NASDAQ:CPRT).
Do Hedge Funds Think CPRT Is A Good Stock To Buy Now?
At Q3's end, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from one quarter earlier. On the other hand, there were a total of 56 hedge funds with a bullish position in CPRT a year ago. With the smart money's sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Among these funds, Gobi Capital held the most valuable stake in Copart, Inc. (NASDAQ:CPRT), which was worth $259.7 million at the end of the third quarter. On the second spot was Praesidium Investment Management Company which amassed $135.7 million worth of shares. Suvretta Capital Management, Echo Street Capital Management, and Point72 Asset 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 Lionstone Capital Management allocated the biggest weight to Copart, Inc. (NASDAQ:CPRT), around 7.66% of its 13F portfolio. Praesidium Investment Management Company is also relatively very bullish on the stock, designating 7.51 percent of its 13F equity portfolio to CPRT.
Judging by the fact that Copart, Inc. (NASDAQ:CPRT) has witnessed falling interest from the smart money, it's safe to say that there lies a certain "tier" of funds that elected to cut their full holdings heading into Q4. It's worth mentioning that William Hyatt's Hudson Way Capital Management sold off the largest position of the 750 funds tracked by Insider Monkey, worth close to $15.2 million in stock, and Brandon Haley's Holocene Advisors was right behind this move, as the fund said goodbye to about $3.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 2 funds heading into Q4.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Copart, Inc. (NASDAQ:CPRT) but similarly valued. These stocks are Pinterest, Inc. (NYSE:PINS), Waste Connections, Inc. (NYSE:WCN), CBRE Group, Inc. (NYSE:CBRE), Affirm Holdings, Inc. (NASDAQ:AFRM), Verisk Analytics, Inc. (NASDAQ:VRSK), EPAM Systems Inc (NYSE:EPAM), and Nasdaq, Inc. (NASDAQ:NDAQ). This group of stocks' market valuations resemble CPRT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PINS,58,2006795,-5 WCN,32,785747,0 CBRE,37,3096989,0 AFRM,39,1491413,14 VRSK,25,1638278,-11 EPAM,42,945738,9 NDAQ,21,257290,-2 Average,36.3,1460321,0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.3 hedge funds with bullish positions and the average amount invested in these stocks was $1460 million. That figure was $998 million in CPRT's case. Pinterest, Inc. (NYSE:PINS) is the most popular stock in this table. On the other hand Nasdaq, Inc. (NASDAQ:NDAQ) is the least popular one with only 21 bullish hedge fund positions. Copart, Inc. (NASDAQ:CPRT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CPRT is 52.4. 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 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 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately CPRT wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CPRT were disappointed as the stock returned 4.6% since the end of September (through 11/30) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.