The 700+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third 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 portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards CoStar Group Inc (NASDAQ:CSGP) after comparing it against peers like Essex Property Trust Inc (NYSE:ESS), TELUS Corporation (NYSE:TU), M&T Bank Corporation (NYSE:MTB), and Smith & Nephew plc (NYSE:SNN).
Is CoStar Group Inc (NASDAQ:CSGP) the right investment to pursue these days? Prominent investors are becoming more confident. The number of long hedge fund positions moved up by 3 lately. Our calculations also showed that CSGP isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). CSGP was in 35 hedge funds' portfolios at the end of the third quarter of 2019. There were 32 hedge funds in our database with CSGP holdings at the end of the previous quarter. Video: Click the image to 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 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
[caption id="attachment_746893" align="aligncenter" width="1613"] Paul Marshall of Marshall Wace[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a peek at the fresh hedge fund action encompassing CoStar Group Inc (NASDAQ:CSGP).
What does smart money think about CoStar Group Inc (NASDAQ:CSGP)?
At the end of the third quarter, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in CSGP over the last 17 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.
The largest stake in CoStar Group Inc (NASDAQ:CSGP) was held by Melvin Capital Management, which reported holding $262.9 million worth of stock at the end of September. It was followed by Select Equity Group with a $223.2 million position. Other investors bullish on the company included Bares Capital Management, Citadel Investment Group, and Millennium Management. In terms of the portfolio weights assigned to each position Wildcat Capital Management allocated the biggest weight to CoStar Group Inc (NASDAQ:CSGP), around 26.86% of its portfolio. Bares Capital Management is also relatively very bullish on the stock, earmarking 6.47 percent of its 13F equity portfolio to CSGP.
As one would reasonably expect, key hedge funds have been driving this bullishness. Interval Partners, managed by Gregg Moskowitz, assembled the most outsized position in CoStar Group Inc (NASDAQ:CSGP). Interval Partners had $11.9 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace also initiated a $7.3 million position during the quarter. The following funds were also among the new CSGP investors: Joel Greenblatt's Gotham Asset Management, Paul Tudor Jones's Tudor Investment Corp, and Matthew Iorio's White Elm Capital.
Let's now take a look at hedge fund activity in other stocks similar to CoStar Group Inc (NASDAQ:CSGP). These stocks are Essex Property Trust Inc (NYSE:ESS), TELUS Corporation (NYSE:TU), M&T Bank Corporation (NYSE:MTB), and Smith & Nephew plc (NYSE:SNN). All of these stocks' market caps are closest to CSGP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ESS,18,400479,-1 TU,17,301500,4 MTB,29,1247730,-2 SNN,6,297897,-8 Average,17.5,561902,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $562 million. That figure was $1384 million in CSGP's case. M&T Bank Corporation (NYSE:MTB) is the most popular stock in this table. On the other hand Smith & Nephew plc (NYSE:SNN) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks CoStar Group Inc (NASDAQ:CSGP) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CSGP wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CSGP were disappointed as the stock returned 3.3% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.