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Hedge Funds Are Betting On Cerence Inc. (CRNC)

·6 min read

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Cerence Inc. (NASDAQ:CRNC) based on that data.

Cerence Inc. (NASDAQ:CRNC) investors should pay attention to an increase in support from the world's most elite money managers lately. Cerence Inc. (NASDAQ:CRNC) was in 21 hedge funds' portfolios at the end of June. The all time high for this statistic is 22. There were 20 hedge funds in our database with CRNC holdings at the end of March. Our calculations also showed that CRNC isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In today’s marketplace there are a multitude of tools stock traders can use to assess stocks. A couple of the most under-the-radar tools are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the elite investment managers can outpace the broader indices by a healthy amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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 take a look at the fresh hedge fund action encompassing Cerence Inc. (NASDAQ:CRNC).

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

Heading into the third quarter of 2021, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in CRNC a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

Is CRNC A Good Stock To Buy?
Is CRNC A Good Stock To Buy?

The largest stake in Cerence Inc. (NASDAQ:CRNC) was held by Moore Global Investments, which reported holding $78.2 million worth of stock at the end of June. It was followed by Millennium Management with a $21.9 million position. Other investors bullish on the company included Honeycomb Asset Management, Osterweis Capital Management, and PEAK6 Capital Management. In terms of the portfolio weights assigned to each position Andar Capital allocated the biggest weight to Cerence Inc. (NASDAQ:CRNC), around 3.57% of its 13F portfolio. Honeycomb Asset Management is also relatively very bullish on the stock, setting aside 1.42 percent of its 13F equity portfolio to CRNC.

With a general bullishness amongst the heavyweights, key money managers were leading the bulls' herd. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, created the biggest position in Cerence Inc. (NASDAQ:CRNC). Polar Capital had $11.1 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also made a $5.8 million investment in the stock during the quarter. The following funds were also among the new CRNC investors: Richard SchimeláandáLawrence Sapanski's Cinctive Capital Management, Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Cerence Inc. (NASDAQ:CRNC) but similarly valued. We will take a look at Parsons Corporation (NYSE:PSN), Companhia Energetica Minas Gerais (NYSE:CIG), Millicom International Cellular S.A. (NASDAQ:TIGO), Artisan Partners Asset Management Inc (NYSE:APAM), KB Home (NYSE:KBH), Ryder System, Inc. (NYSE:R), and Pacific Premier Bancorp, Inc. (NASDAQ:PPBI). This group of stocks' market values resemble CRNC's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PSN,9,18808,0 CIG,15,108359,2 TIGO,7,78275,2 APAM,19,182843,-2 KBH,27,287645,3 R,18,271045,-2 PPBI,12,138610,2 Average,15.3,155084,0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.3 hedge funds with bullish positions and the average amount invested in these stocks was $155 million. That figure was $185 million in CRNC's case. KB Home (NYSE:KBH) is the most popular stock in this table. On the other hand Millicom International Cellular S.A. (NASDAQ:TIGO) is the least popular one with only 7 bullish hedge fund positions. Cerence Inc. (NASDAQ:CRNC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CRNC is 69.6. 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 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 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately CRNC wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CRNC were disappointed as the stock returned -11.4% since the end of June (through 10/22) 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.