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Hedge Funds Couldn’t Have Been More Wrong About Carnival Corporation (CCL)

Asma UL Husna

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession.

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article we look at what those investors think of Carnival Corporation & Plc (NYSE:CCL).

Carnival Corporation & Plc (NYSE:CCL) investors should pay attention to an increase in hedge fund interest recently. Our calculations also showed that CCL isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Today there are a multitude of gauges stock market investors employ to assess stocks. A duo of the less utilized gauges are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the best money managers can beat their index-focused peers by a solid margin (see the details here).

[caption id="attachment_673253" align="aligncenter" width="399"] Jeffrey Talpins of Element Capital[/caption]

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Keeping this in mind let's take a peek at the recent hedge fund action regarding Carnival Corporation & Plc (NYSE:CCL).

Hedge fund activity in Carnival Corporation & Plc (NYSE:CCL)

Heading into the first quarter of 2020, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CCL over the last 18 quarters. With the smart money's sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Among these funds, Arrowstreet Capital held the most valuable stake in Carnival Corporation & Plc (NYSE:CCL), which was worth $250.8 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $164.2 million worth of shares. Echo Street Capital Management, Millennium Management, and AQR Capital 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 Albar Capital allocated the biggest weight to Carnival Corporation & Plc (NYSE:CCL), around 7.18% of its 13F portfolio. Element Capital Management is also relatively very bullish on the stock, setting aside 2.92 percent of its 13F equity portfolio to CCL.

As one would reasonably expect, key money managers were leading the bulls' herd. Holocene Advisors, managed by Brandon Haley, created the largest position in Carnival Corporation & Plc (NYSE:CCL). Holocene Advisors had $40.4 million invested in the company at the end of the quarter. John W. Rogers's Ariel Investments also initiated a $31.6 million position during the quarter. The other funds with brand new CCL positions are Javier Velazquez's Albar Capital, Jeffrey Talpins's Element Capital Management, and Anand Parekh's Alyeska Investment Group.

Let's go over hedge fund activity in other stocks similar to Carnival Corporation & Plc (NYSE:CCL). These stocks are Energy Transfer L.P. (NYSE:ET), Monster Beverage Corp (NASDAQ:MNST), Carnival Corporation & Plc (NYSE:CUK), and Cognizant Technology Solutions Corp (NASDAQ:CTSH). All of these stocks' market caps are closest to CCL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ET,36,718963,2 MNST,45,3533015,9 CUK,14,154668,3 CTSH,43,2935648,-5 Average,34.5,1835574,2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.5 hedge funds with bullish positions and the average amount invested in these stocks was $1836 million. That figure was $895 million in CCL's case. Monster Beverage Corp (NASDAQ:MNST) is the most popular stock in this table. On the other hand Carnival Corporation & Plc (NYSE:CUK) is the least popular one with only 14 bullish hedge fund positions. Carnival Corporation & Plc (NYSE:CCL) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but beat the market by 3.1 percentage points. Unfortunately CCL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CCL investors were disappointed as the stock returned -56.7% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.

Disclosure: None. This article was originally published at Insider Monkey.

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