We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Covetrus, Inc. (NASDAQ:CVET).
Covetrus, Inc. (NASDAQ:CVET) shareholders have witnessed an increase in hedge fund interest recently. Our calculations also showed that CVET isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). 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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26082" align="aligncenter" width="466"] Andreas Halvorsen of Viking Global[/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 check out the fresh hedge fund action surrounding Covetrus, Inc. (NASDAQ:CVET).
Hedge fund activity in Covetrus, Inc. (NASDAQ:CVET)
At Q3's end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CVET over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Hillhouse Capital Management, managed by Lei Zhang, holds the biggest position in Covetrus, Inc. (NASDAQ:CVET). Hillhouse Capital Management has a $47.1 million position in the stock, comprising 0.6% of its 13F portfolio. The second largest stake is held by Viking Global, managed by Andreas Halvorsen, which holds a $40.2 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish encompass Michael Doheny's Freshford Capital Management, Ken Griffin's Citadel Investment Group and Mario Gabelli's GAMCO Investors. In terms of the portfolio weights assigned to each position Freshford Capital Management allocated the biggest weight to Covetrus, Inc. (NASDAQ:CVET), around 5.77% of its 13F portfolio. Clearline Capital is also relatively very bullish on the stock, setting aside 0.68 percent of its 13F equity portfolio to CVET.
Consequently, some big names were breaking ground themselves. Clearline Capital, managed by Marc Majzner, established the largest position in Covetrus, Inc. (NASDAQ:CVET). Clearline Capital had $1.5 million invested in the company at the end of the quarter. David MacKnight's One Fin Capital Management also initiated a $0.7 million position during the quarter. The other funds with new positions in the stock are Israel Englander's Millennium Management, John Overdeck and David Siegel's Two Sigma Advisors, and Michael Gelband's ExodusPoint Capital.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Covetrus, Inc. (NASDAQ:CVET) but similarly valued. These stocks are Herc Holdings Inc. (NYSE:HRI), Getty Realty Corp. (NYSE:GTY), Synaptics Incorporated (NASDAQ:SYNA), and Golar LNG Limited (NASDAQ:GLNG). This group of stocks' market valuations are similar to CVET's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HRI,26,565982,4 GTY,9,92245,-1 SYNA,19,266720,6 GLNG,24,249259,1 Average,19.5,293552,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $294 million. That figure was $140 million in CVET's case. Herc Holdings Inc. (NYSE:HRI) is the most popular stock in this table. On the other hand Getty Realty Corp. (NYSE:GTY) is the least popular one with only 9 bullish hedge fund positions. Covetrus, Inc. (NASDAQ:CVET) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on CVET as the stock returned 20.4% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.