At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Curtiss-Wright Corp. (NYSE:CW).
Curtiss-Wright Corp. (NYSE:CW) was in 21 hedge funds' portfolios at the end of March. CW has experienced a decrease in enthusiasm from smart money recently. There were 22 hedge funds in our database with CW positions at the end of the previous quarter. Our calculations also showed that CW 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_745225" align="aligncenter" width="400"] Noam Gottesman of GLG Partners[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. 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 let's take a peek at the key hedge fund action encompassing Curtiss-Wright Corp. (NYSE:CW).
How are hedge funds trading Curtiss-Wright Corp. (NYSE:CW)?
At the end of the first quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from one quarter earlier. By comparison, 21 hedge funds held shares or bullish call options in CW a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in Curtiss-Wright Corp. (NYSE:CW), which was worth $82.3 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $48.1 million worth of shares. GAMCO Investors, GLG Partners, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Jade Capital Advisors allocated the biggest weight to Curtiss-Wright Corp. (NYSE:CW), around 5.14% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, designating 0.44 percent of its 13F equity portfolio to CW.
Seeing as Curtiss-Wright Corp. (NYSE:CW) has experienced declining sentiment from hedge fund managers, it's easy to see that there is a sect of fund managers that elected to cut their positions entirely last quarter. At the top of the heap, Lee Ainslie's Maverick Capital cut the largest investment of the 750 funds watched by Insider Monkey, totaling about $1.4 million in stock, and Benjamin A. Smith's Laurion Capital Management was right behind this move, as the fund sold off about $0.6 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds last quarter.
Let's go over hedge fund activity in other stocks similar to Curtiss-Wright Corp. (NYSE:CW). These stocks are MSA Safety Incorporated (NYSE:MSA), Coty Inc (NYSE:COTY), Hudson Pacific Properties Inc (NYSE:HPP), and US Foods Holding Corp. (NYSE:USFD). This group of stocks' market values are similar to CW's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MSA,11,26188,-4 COTY,33,183298,4 HPP,19,231967,0 USFD,33,507135,-4 Average,24,237147,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $237 million. That figure was $257 million in CW's case. Coty Inc (NYSE:COTY) is the most popular stock in this table. On the other hand MSA Safety Incorporated (NYSE:MSA) is the least popular one with only 11 bullish hedge fund positions. Curtiss-Wright Corp. (NYSE:CW) is not the least popular stock in this group but hedge fund interest is still below average. 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 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 12.2% in 2020 through June 17th and surpassed the market by 14.8 percentage points. Unfortunately CW wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CW investors were disappointed as the stock returned 1.5% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.