Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don't make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and a 20% drop in stock prices. Things completely reversed in 2019 and stock indices hit record highs. Recent hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards CSG Systems International, Inc. (NASDAQ:CSGS) to find out whether it was one of their high conviction long-term ideas.
CSG Systems International, Inc. (NASDAQ:CSGS) investors should pay attention to an increase in support from the world's most elite money managers in recent months. Our calculations also showed that CSGS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
At the moment there are numerous methods stock traders use to evaluate their holdings. Two of the less utilized methods are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the elite fund managers can beat the broader indices by a healthy margin (see the details here).
[caption id="attachment_746893" align="aligncenter" width="473"] Paul Marshall of Marshall Wace[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to view the fresh hedge fund action encompassing CSG Systems International, Inc. (NASDAQ:CSGS).
What have hedge funds been doing with CSG Systems International, Inc. (NASDAQ:CSGS)?
Heading into the fourth quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in CSGS over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the number one position in CSG Systems International, Inc. (NASDAQ:CSGS), worth close to $119.9 million, amounting to 0.1% of its total 13F portfolio. The second most bullish fund manager is Polar Capital, led by Brian Ashford-Russell and Tim Woolley, holding a $34.6 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions include Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Israel Englander's Millennium Management and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to CSG Systems International, Inc. (NASDAQ:CSGS), around 0.74% of its 13F portfolio. Polar Capital is also relatively very bullish on the stock, dishing out 0.31 percent of its 13F equity portfolio to CSGS.
As aggregate interest increased, some big names were leading the bulls' herd. Paloma Partners, managed by Donald Sussman, assembled the most outsized position in CSG Systems International, Inc. (NASDAQ:CSGS). Paloma Partners had $0.6 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also initiated a $0.3 million position during the quarter. The other funds with brand new CSGS positions are Paul Marshall and Ian Wace's Marshall Wace and Steve Cohen's Point72 Asset Management.
Let's check out hedge fund activity in other stocks similar to CSG Systems International, Inc. (NASDAQ:CSGS). These stocks are Group 1 Automotive, Inc. (NYSE:GPI), Skyline Champion Corporation (NYSE:SKY), Fanhua Inc. (NASDAQ:FANH), and Enerplus Corp (NYSE:ERF). This group of stocks' market values resemble CSGS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GPI,20,171213,7 SKY,25,283836,0 FANH,8,16703,-1 ERF,15,155867,3 Average,17,156905,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $157 million. That figure was $221 million in CSGS's case. Skyline Champion Corporation (NYSE:SKY) is the most popular stock in this table. On the other hand Fanhua Inc. (NASDAQ:FANH) is the least popular one with only 8 bullish hedge fund positions. CSG Systems International, Inc. (NASDAQ:CSGS) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on CSGS as the stock returned 10.7% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.