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Do Hedge Funds Love Companhia Brasileira de Distrib. (CBD)?

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Asma UL Husna
·6 min read
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After several tireless days we have finished crunching the numbers from nearly 817 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Companhia Brasileira de Distrib. (NYSE:CBD).

Companhia Brasileira de Distrib. (NYSE:CBD) investors should pay attention to an increase in support from the world's most elite money managers lately. Companhia Brasileira de Distrib. (NYSE:CBD) was in 7 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 13. There were 6 hedge funds in our database with CBD holdings at the end of June. Our calculations also showed that CBD isn't among the 30 most popular stocks among hedge funds (click for Q3 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Gavin Saitowitz of Prelude Capital
Gavin Saitowitz of Prelude Capital

Gavin Saitowitz of Prelude Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Now let's take a glance at the latest hedge fund action regarding Companhia Brasileira de Distrib. (NYSE:CBD).

How are hedge funds trading Companhia Brasileira de Distrib. (NYSE:CBD)?

At third quarter's end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in CBD a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

The largest stake in Companhia Brasileira de Distrib. (NYSE:CBD) was held by Renaissance Technologies, which reported holding $5.5 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $2 million position. Other investors bullish on the company included Millennium Management, Citadel Investment Group, and Portland Hill Asset Management. In terms of the portfolio weights assigned to each position Portland Hill Asset Management allocated the biggest weight to Companhia Brasileira de Distrib. (NYSE:CBD), around 0.33% of its 13F portfolio. Prelude Capital (previously Springbok Capital) is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to CBD.

Consequently, key money managers were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, assembled the most outsized position in Companhia Brasileira de Distrib. (NYSE:CBD). Citadel Investment Group had $0.4 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle's Prelude Capital (previously Springbok Capital) also made a $0.3 million investment in the stock during the quarter. The only other fund with a new position in the stock is Matthew Hulsizer's PEAK6 Capital Management.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Companhia Brasileira de Distrib. (NYSE:CBD) but similarly valued. We will take a look at New Residential Investment Corp (NYSE:NRZ), EQT Corporation (NYSE:EQT), Granite Real Estate Investment Trust (NYSE:GRP), Saia Inc (NASDAQ:SAIA), J2 Global Inc (NASDAQ:JCOM), Armstrong World Industries, Inc. (NYSE:AWI), and Seaboard Corporation (NYSE:SEB). This group of stocks' market values match CBD's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NRZ,21,134416,-1 EQT,39,310693,5 GRP,6,29425,0 SAIA,20,67732,3 JCOM,25,222865,-5 AWI,30,351590,-4 SEB,16,120834,2 Average,22.4,176794,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.4 hedge funds with bullish positions and the average amount invested in these stocks was $177 million. That figure was $11 million in CBD's case. EQT Corporation (NYSE:EQT) is the most popular stock in this table. On the other hand Granite Real Estate Investment Trust (NYSE:GRP) is the least popular one with only 6 bullish hedge fund positions. Companhia Brasileira de Distrib. (NYSE:CBD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CBD is 23.7. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and surpassed the market again by 16 percentage points. Unfortunately CBD wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CBD investors were disappointed as the stock returned 3.7% since the end of September (through 12/2) 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 2020.

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

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