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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 5 years and analyze what the smart money thinks of CarGurus, Inc. (NASDAQ:CARG) based on that data and determine whether they were really smart about the stock.
CarGurus, Inc. (NASDAQ:CARG) investors should be aware of an increase in enthusiasm from smart money lately. CarGurus, Inc. (NASDAQ:CARG) was in 31 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 33. Our calculations also showed that CARG isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most investors, hedge funds are seen as unimportant, old financial tools of yesteryear. While there are more than 8000 funds in operation today, Our experts hone in on the bigwigs of this group, about 850 funds. It is estimated that this group of investors direct the majority of the hedge fund industry's total capital, and by following their highest performing picks, Insider Monkey has formulated a few investment strategies that have historically surpassed the market. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Paul Reeder of PAR Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we're going to take a look at the latest hedge fund action regarding CarGurus, Inc. (NASDAQ:CARG).
How are hedge funds trading CarGurus, Inc. (NASDAQ:CARG)?
Heading into the third quarter of 2020, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in CARG a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, HMI Capital held the most valuable stake in CarGurus, Inc. (NASDAQ:CARG), which was worth $164.4 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $33.3 million worth of shares. Two Sigma Advisors, StackLine Partners, and Hound Partners 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 StackLine Partners allocated the biggest weight to CarGurus, Inc. (NASDAQ:CARG), around 9.13% of its 13F portfolio. HMI Capital is also relatively very bullish on the stock, setting aside 7.84 percent of its 13F equity portfolio to CARG.
As aggregate interest increased, specific money managers have jumped into CarGurus, Inc. (NASDAQ:CARG) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the most valuable position in CarGurus, Inc. (NASDAQ:CARG). Arrowstreet Capital had $33.3 million invested in the company at the end of the quarter. Brian Gootzeit and Andrew Frank's StackLine Partners also initiated a $24.4 million position during the quarter. The following funds were also among the new CARG investors: Alexander Mitchell's Scopus Asset Management, Ricky Sandler's Eminence Capital, and Paul Reeder and Edward Shapiro's PAR Capital Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as CarGurus, Inc. (NASDAQ:CARG) but similarly valued. These stocks are The Howard Hughes Corporation (NYSE:HHC), NuVasive, Inc. (NASDAQ:NUVA), Shift4 Payments, Inc. (NYSE:FOUR), Univar Solutions Inc (NYSE:UNVR), National Beverage Corp. (NASDAQ:FIZZ), Corporate Office Properties Trust (NYSE:OFC), and Blackbaud, Inc. (NASDAQ:BLKB). All of these stocks' market caps match CARG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HHC,28,765597,4 NUVA,33,484596,9 FOUR,15,72444,15 UNVR,31,920084,-1 FIZZ,21,259591,1 OFC,20,209407,3 BLKB,19,95711,-3 Average,23.9,401061,4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.9 hedge funds with bullish positions and the average amount invested in these stocks was $401 million. That figure was $411 million in CARG's case. NuVasive, Inc. (NASDAQ:NUVA) is the most popular stock in this table. On the other hand Shift4 Payments, Inc. (NYSE:FOUR) is the least popular one with only 15 bullish hedge fund positions. CarGurus, Inc. (NASDAQ:CARG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CARG is 82.6. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23.8% in 2020 through September 14th and beat the market by 17.6 percentage points. Unfortunately CARG wasn't nearly as popular as these 10 stocks and hedge funds that were betting on CARG were disappointed as the stock returned -4.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.