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Hedge Funds Are Dumping Carnival Corporation & plc (CCL)

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While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Carnival Corporation & plc (NYSE:CCL).

Is Carnival Corporation & plc (NYSE:CCL) a cheap investment right now? Money managers were becoming less hopeful. The number of bullish hedge fund positions retreated by 13 in recent months. Carnival Corporation & plc (NYSE:CCL) was in 31 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 53. Our calculations also showed that CCL isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Paul Marshall Marshall Wace
Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

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. With all of this in mind let's view the fresh hedge fund action regarding Carnival Corporation & plc (NYSE:CCL).

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

Heading into the third quarter of 2021, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -30% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards CCL over the last 24 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, D. E. Shaw's D E Shaw has the number one position in Carnival Corporation & plc (NYSE:CCL), worth close to $172.3 million, corresponding to 0.1% of its total 13F portfolio. On D E Shaw's heels is Chris Rokos of Rokos Capital Management, with a $147.6 million call position; the fund has 2.9% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism consist of Panayotis Takis Sparaggis's Alkeon Capital Management, and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Covalent Capital Partners allocated the biggest weight to Carnival Corporation & plc (NYSE:CCL), around 3.23% of its 13F portfolio. Rokos Capital Management is also relatively very bullish on the stock, earmarking 2.94 percent of its 13F equity portfolio to CCL.

Since Carnival Corporation & plc (NYSE:CCL) has witnessed bearish sentiment from the smart money, we can see that there was a specific group of hedge funds that decided to sell off their entire stakes in the second quarter. At the top of the heap, Josh Resnick's Jericho Capital Asset Management dumped the biggest stake of the "upper crust" of funds monitored by Insider Monkey, comprising about $116.6 million in stock, and Edmond M. Safra's EMS Capital was right behind this move, as the fund said goodbye to about $30 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 13 funds in the second quarter.

Let's also examine hedge fund activity in other stocks similar to Carnival Corporation & plc (NYSE:CCL). We will take a look at Waste Connections, Inc. (NYSE:WCN), Copart, Inc. (NASDAQ:CPRT), Lennar Corporation (NYSE:LEN), Ferguson plc (NYSE:FERG), PACCAR Inc (NASDAQ:PCAR), AMETEK, Inc. (NYSE:AME), and Unity Software Inc. (NYSE:U). All of these stocks' market caps are similar to CCL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WCN,32,763813,1 CPRT,44,992348,-5 LEN,50,1974872,1 FERG,11,6877154,6 PCAR,28,623669,0 AME,38,912985,6 U,29,7263688,-10 Average,33.1,2772647,-0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.1 hedge funds with bullish positions and the average amount invested in these stocks was $2773 million. That figure was $456 million in CCL's case. Lennar Corporation (NYSE:LEN) is the most popular stock in this table. On the other hand Ferguson plc (NYSE:FERG) is the least popular one with only 11 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. Our overall hedge fund sentiment score for CCL is 35.2. 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 negative signal and 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 24.9% in 2021 through October 15th and surpassed the market again by 4.5 percentage points. Unfortunately CCL wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CCL investors were disappointed as the stock returned -10.2% since the end of June (through 10/15) 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 most of these stocks already outperformed the market in 2021.

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