Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Cree, Inc. (NASDAQ:CREE) in this article.
Is Cree, Inc. (NASDAQ:CREE) a good investment now? Hedge funds are taking an optimistic view. The number of long hedge fund positions improved by 10 lately. Our calculations also showed that CREE isn't among the 30 most popular stocks among hedge funds (view the video below). 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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a gander at the key hedge fund action regarding Cree, Inc. (NASDAQ:CREE).
How are hedge funds trading Cree, Inc. (NASDAQ:CREE)?
At Q2's end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 71% from the first quarter of 2019. By comparison, 10 hedge funds held shares or bullish call options in CREE a year ago. So, let's review 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, David Cohen and Harold Levy's Iridian Asset Management has the biggest position in Cree, Inc. (NASDAQ:CREE), worth close to $144.2 million, comprising 2.1% of its total 13F portfolio. Coming in second is Israel Englander of Millennium Management, with a $73.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions consist of Alex Sacerdote's Whale Rock Capital Management, Principal Global Investors's Columbus Circle Investors and Renaissance Technologies.
As aggregate interest increased, key hedge funds have jumped into Cree, Inc. (NASDAQ:CREE) headfirst. Iridian Asset Management, managed by David Cohen and Harold Levy, established the biggest position in Cree, Inc. (NASDAQ:CREE). Iridian Asset Management had $144.2 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also initiated a $73.5 million position during the quarter. The other funds with new positions in the stock are Alex Sacerdote's Whale Rock Capital Management, Renaissance Technologies, and Steve Cohen's Point72 Asset Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Cree, Inc. (NASDAQ:CREE) but similarly valued. We will take a look at Farfetch Limited (NYSE:FTCH), First American Financial Corp (NYSE:FAF), NovoCure Limited (NASDAQ:NVCR), and Hanesbrands Inc. (NYSE:HBI). All of these stocks' market caps are similar to CREE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FTCH,24,598527,-19 FAF,34,772370,4 NVCR,22,426721,-3 HBI,22,402748,-8 Average,25.5,550092,-6.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $550 million. That figure was $426 million in CREE's case. First American Financial Corp (NYSE:FAF) is the most popular stock in this table. On the other hand NovoCure Limited (NASDAQ:NVCR) is the least popular one with only 22 bullish hedge fund positions. Cree, Inc. (NASDAQ:CREE) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CREE wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CREE investors were disappointed as the stock returned -12.8% during the third 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.