Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Cinemark Holdings, Inc. (NYSE:CNK)? The smart money sentiment can provide an answer to this question.
Is Cinemark Holdings, Inc. (NYSE:CNK) a buy right now? Prominent investors are getting less optimistic. The number of bullish hedge fund bets were cut by 3 lately. Our calculations also showed that CNK isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). CNK was in 19 hedge funds' portfolios at the end of September. There were 22 hedge funds in our database with CNK 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_26794" align="aligncenter" width="359"] Paul Tudor Jones of Tudor Investment Corp[/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 gander at the new hedge fund action surrounding Cinemark Holdings, Inc. (NYSE:CNK).
What does smart money think about Cinemark Holdings, Inc. (NYSE:CNK)?
At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CNK over the last 17 quarters. With the smart money's capital changing hands, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Cinemark Holdings, Inc. (NYSE:CNK), with a stake worth $142.7 million reported as of the end of September. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $16.8 million. Millennium Management, AQR Capital Management, and Tudor Investment Corp 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 Tudor Investment Corp allocated the biggest weight to Cinemark Holdings, Inc. (NYSE:CNK), around 0.39% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, dishing out 0.17 percent of its 13F equity portfolio to CNK.
Because Cinemark Holdings, Inc. (NYSE:CNK) has witnessed falling interest from the smart money, logic holds that there lies a certain "tier" of fund managers who sold off their positions entirely heading into Q4. At the top of the heap, Genevieve Kahr's Ailanthus Capital Management said goodbye to the biggest investment of the 750 funds followed by Insider Monkey, comprising an estimated $6.6 million in stock. Renee Yao's fund, Neo Ivy Capital, also sold off its stock, about $1.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Cinemark Holdings, Inc. (NYSE:CNK) but similarly valued. These stocks are ALLETE Inc (NYSE:ALE), AutoNation, Inc. (NYSE:AN), Brighthouse Financial, Inc. (NASDAQ:BHF), and Marriott Vacations Worldwide Corporation (NYSE:VAC). This group of stocks' market valuations match CNK's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ALE,19,278228,-5 AN,21,416097,-1 BHF,26,528808,3 VAC,27,488721,0 Average,23.25,427964,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $428 million. That figure was $233 million in CNK's case. Marriott Vacations Worldwide Corporation (NYSE:VAC) is the most popular stock in this table. On the other hand ALLETE Inc (NYSE:ALE) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Cinemark Holdings, Inc. (NYSE:CNK) is even less popular than ALE. Hedge funds dodged a bullet by taking a bearish stance towards CNK. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CNK wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CNK investors were disappointed as the stock returned -12.3% during the fourth quarter (through the end of November) 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 so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.