In this article you are going to find out whether hedge funds think Cass Information Systems (NASDAQ:CASS) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Cass Information Systems (NASDAQ:CASS) has experienced a decrease in enthusiasm from smart money in recent months. Our calculations also showed that CASS isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_746830" align="aligncenter" width="400"] Matthew Hulsizer of PEAK6 Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a peek at the new hedge fund action regarding Cass Information Systems (NASDAQ:CASS).
Hedge fund activity in Cass Information Systems (NASDAQ:CASS)
At Q1's end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CASS over the last 18 quarters. So, let's check 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, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital has the biggest position in Cass Information Systems (NASDAQ:CASS), worth close to $4.5 million, corresponding to less than 0.1%% of its total 13F portfolio. The second most bullish fund is Renaissance Technologies, with a $2 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers with similar optimism encompass Chuck Royce's Royce & Associates, David Harding's Winton Capital Management and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Winton Capital Management allocated the biggest weight to Cass Information Systems (NASDAQ:CASS), around 0.03% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to CASS.
Due to the fact that Cass Information Systems (NASDAQ:CASS) has witnessed falling interest from hedge fund managers, it's safe to say that there were a few fund managers that elected to cut their positions entirely heading into Q4. Intriguingly, Richard Driehaus's Driehaus Capital said goodbye to the biggest stake of the 750 funds followed by Insider Monkey, worth about $0.6 million in stock, and D. E. Shaw's D E Shaw was right behind this move, as the fund cut about $0.4 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 2 funds heading into Q4.
Let's now review hedge fund activity in other stocks similar to Cass Information Systems (NASDAQ:CASS). We will take a look at Vista Outdoor Inc (NYSE:VSTO), Monarch Casino & Resort, Inc. (NASDAQ:MCRI), Seritage Growth Properties (NYSE:SRG), and Gores Metropoulos, Inc. (NASDAQ:GMHI). This group of stocks' market valuations resemble CASS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VSTO,19,121745,0 MCRI,15,75297,3 SRG,17,85126,2 GMHI,16,134362,-1 Average,16.75,104133,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $104 million. That figure was $12 million in CASS's case. Vista Outdoor Inc (NYSE:VSTO) is the most popular stock in this table. On the other hand Monarch Casino & Resort, Inc. (NASDAQ:MCRI) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Cass Information Systems (NASDAQ:CASS) is even less popular than MCRI. Hedge funds dodged a bullet by taking a bearish stance towards CASS. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but managed to beat the market by 15.9 percentage points. Unfortunately CASS wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); CASS investors were disappointed as the stock returned 10% during the second quarter (through June 22nd) 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 most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.