Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by more than 6 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of America's Car-Mart, Inc. (NASDAQ:CRMT).
Is America's Car-Mart, Inc. (NASDAQ:CRMT) a healthy stock for your portfolio? The best stock pickers are turning bullish. The number of long hedge fund bets moved up by 2 lately. Our calculations also showed that crmt isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to take a look at the new hedge fund action encompassing America's Car-Mart, Inc. (NASDAQ:CRMT).
What does the smart money think about America's Car-Mart, Inc. (NASDAQ:CRMT)?
Heading into the second quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in CRMT 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the biggest position in America's Car-Mart, Inc. (NASDAQ:CRMT). Royce & Associates has a $19.9 million position in the stock, comprising 0.2% of its 13F portfolio. The second most bullish fund manager is George McCabe of Portolan Capital Management, with a $19.5 million position; the fund has 2% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions contain Ken Grossman and Glen Schneider's SG Capital Management, Jim Simons's Renaissance Technologies and Ken Griffin's Citadel Investment Group.
Now, some big names were leading the bulls' herd. Winton Capital Management, managed by David Harding, assembled the largest position in America's Car-Mart, Inc. (NASDAQ:CRMT). Winton Capital Management had $0.6 million invested in the company at the end of the quarter. Louis Navellier's Navellier & Associates also initiated a $0.2 million position during the quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as America's Car-Mart, Inc. (NASDAQ:CRMT) but similarly valued. These stocks are GMS Inc. (NYSE:GMS), Star Bulk Carriers Corp. (NASDAQ:SBLK), Navigator Holdings Ltd (NYSE:NVGS), and Quad/Graphics, Inc. (NYSE:QUAD). This group of stocks' market caps match CRMT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GMS,20,74836,0 SBLK,15,305848,-4 NVGS,13,280280,1 QUAD,22,39329,2 Average,17.5,175073,-0.25 [/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 $175 million. That figure was $89 million in CRMT's case. Quad/Graphics, Inc. (NYSE:QUAD) is the most popular stock in this table. On the other hand Navigator Holdings Ltd (NYSE:NVGS) is the least popular one with only 13 bullish hedge fund positions. America's Car-Mart, Inc. (NASDAQ:CRMT) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately CRMT wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CRMT were disappointed as the stock returned -5% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.