Hedge Funds Are Getting Bullish On Cantel Medical Corp. (CMD)
In this article you are going to find out whether hedge funds think Cantel Medical Corp. (NYSE:CMD) 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.
Is Cantel Medical Corp. (NYSE:CMD) a great investment today? Hedge funds are taking an optimistic view. The number of bullish hedge fund bets increased by 6 lately. Our calculations also showed that CMD 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.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to check out the new hedge fund action regarding Cantel Medical Corp. (NYSE:CMD).
What does smart money think about Cantel Medical Corp. (NYSE:CMD)?
At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 55% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CMD over the last 18 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Cantel Medical Corp. (NYSE:CMD) was held by Diker Management, which reported holding $41.8 million worth of stock at the end of September. It was followed by Millennium Management with a $24.8 million position. Other investors bullish on the company included Citadel Investment Group, Laurion Capital Management, and GAMCO Investors. In terms of the portfolio weights assigned to each position Diker Management allocated the biggest weight to Cantel Medical Corp. (NYSE:CMD), around 17.65% of its 13F portfolio. Ellington is also relatively very bullish on the stock, designating 0.09 percent of its 13F equity portfolio to CMD.
Now, specific money managers were leading the bulls' herd. Laurion Capital Management, managed by Benjamin A. Smith, assembled the most outsized position in Cantel Medical Corp. (NYSE:CMD). Laurion Capital Management had $1.5 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also initiated a $1.3 million position during the quarter. The other funds with brand new CMD positions are Cliff Asness's AQR Capital Management, Greg Eisner's Engineers Gate Manager, and D. E. Shaw's D E Shaw.
Let's go over hedge fund activity in other stocks similar to Cantel Medical Corp. (NYSE:CMD). These stocks are Guangshen Railway Co. Ltd (NYSE:GSH), Horace Mann Educators Corporation (NYSE:HMN), Tenet Healthcare Corp (NYSE:THC), and American Assets Trust, Inc (NYSE:AAT). This group of stocks' market valuations are closest to CMD's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GSH,2,3453,1 HMN,11,22120,0 THC,35,490303,1 AAT,15,33326,0 Average,15.75,137301,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $137 million. That figure was $89 million in CMD's case. Tenet Healthcare Corp (NYSE:THC) is the most popular stock in this table. On the other hand Guangshen Railway Co. Ltd (NYSE:GSH) is the least popular one with only 2 bullish hedge fund positions. Cantel Medical Corp. (NYSE:CMD) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds 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 still beat the market by 15.9 percentage points. Hedge funds were also right about betting on CMD, though not to the same extent, as the stock returned 24.2% during the first two months and twenty two days of the second quarter and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.
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