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Hedge Funds Are Dumping Cosan Limited (CZZ)

Al Green

The 700+ hedge funds and money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund positions. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Cosan Limited (NYSE:CZZ).

Cosan Limited (NYSE:CZZ) shareholders have witnessed a decrease in hedge fund interest recently. Our calculations also showed that CZZ isn't among the 30 most popular stocks among hedge funds.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

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We're going to take a gander at the recent hedge fund action regarding Cosan Limited (NYSE:CZZ).

How are hedge funds trading Cosan Limited (NYSE:CZZ)?

At Q3's end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in CZZ over the last 13 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds CZZ Positions

The largest stake in Cosan Limited (NYSE:CZZ) was held by Moon Capital, which reported holding $29.8 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $23.6 million position. Other investors bullish on the company included Arrowstreet Capital, Lonestar Capital Management, and Carlson Capital.

Since Cosan Limited (NYSE:CZZ) has faced falling interest from the smart money, it's easy to see that there were a few fund managers that decided to sell off their positions entirely heading into Q3. It's worth mentioning that Glenn Russell Dubin's Highbridge Capital Management dumped the biggest position of the 700 funds followed by Insider Monkey, comprising about $1.5 million in stock. Noam Gottesman's fund, GLG Partners, also said goodbye to its stock, about $0.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 4 funds heading into Q3.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Cosan Limited (NYSE:CZZ) but similarly valued. These stocks are Fresh Del Monte Produce Inc (NYSE:FDP), Provident Financial Services, Inc. (NYSE:PFS), Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC), and TTM Technologies, Inc. (NASDAQ:TTMI). This group of stocks' market valuations resemble CZZ's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FDP,14,38046,3 PFS,8,50269,1 TRHC,10,31591,-1 TTMI,16,57708,6 Average,12,44404,2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $44 million. That figure was $98 million in CZZ's case. TTM Technologies, Inc. (NASDAQ:TTMI) is the most popular stock in this table. On the other hand Provident Financial Services, Inc. (NYSE:PFS) is the least popular one with only 8 bullish hedge fund positions. Cosan Limited (NYSE:CZZ) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. In this regard TTMI might be a better candidate to consider a long position.

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

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