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We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Cinemark Holdings, Inc. (NYSE:CNK) and determine whether hedge funds skillfully traded this stock.
Is Cinemark Holdings, Inc. (NYSE:CNK) a buy here? Prominent investors were in a pessimistic mood. The number of long hedge fund bets shrunk by 3 lately. Cinemark Holdings, Inc. (NYSE:CNK) was in 24 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 27. Our calculations also showed that CNK isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 27 hedge funds in our database with CNK positions at the end of the first quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most shareholders, hedge funds are seen as worthless, outdated investment tools of the past. While there are over 8000 funds with their doors open today, We hone in on the aristocrats of this group, approximately 850 funds. Most estimates calculate that this group of people handle the majority of all hedge funds' total asset base, and by following their matchless equity investments, Insider Monkey has determined various investment strategies that have historically beaten the broader indices. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Colin Moran of Abdiel Capital Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind we're going to take a glance at the key hedge fund action regarding Cinemark Holdings, Inc. (NYSE:CNK).
Hedge fund activity in Cinemark Holdings, Inc. (NYSE:CNK)
Heading into the third quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in CNK over the last 20 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the largest position in Cinemark Holdings, Inc. (NYSE:CNK), worth close to $97.5 million, corresponding to 0.1% of its total 13F portfolio. The second largest stake is held by Cliff Asness of AQR Capital Management, with a $50.4 million position; 0.1% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism encompass Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Ken Griffin's Citadel Investment Group and Paul Singer's Elliott Investment Management. In terms of the portfolio weights assigned to each position Impala Asset Management allocated the biggest weight to Cinemark Holdings, Inc. (NYSE:CNK), around 1.23% of its 13F portfolio. Cove Street Capital is also relatively very bullish on the stock, dishing out 1.09 percent of its 13F equity portfolio to CNK.
Due to the fact that Cinemark Holdings, Inc. (NYSE:CNK) has experienced a decline in interest from the aggregate hedge fund industry, it's safe to say that there is a sect of funds that elected to cut their full holdings last quarter. Interestingly, Barry Lebovits and Joshua Kuntz's Rivulet Capital dropped the largest stake of the 750 funds followed by Insider Monkey, worth about $50.9 million in stock, and Christopher Lyle's SCGE Management was right behind this move, as the fund dumped about $22.4 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 3 funds last quarter.
Let's go over hedge fund activity in other stocks similar to Cinemark Holdings, Inc. (NYSE:CNK). We will take a look at Nova Measuring Instruments Ltd. (NASDAQ:NVMI), GCP Applied Technologies Inc. (NYSE:GCP), Bed Bath & Beyond Inc. (NASDAQ:BBBY), Weis Markets, Inc. (NYSE:WMK), NGM Biopharmaceuticals, Inc. (NASDAQ:NGM), NBT Bancorp Inc. (NASDAQ:NBTB), and OSI Systems, Inc. (NASDAQ:OSIS). All of these stocks' market caps match CNK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NVMI,13,214290,3 GCP,21,341512,9 BBBY,33,351185,5 WMK,19,51204,7 NGM,12,106170,0 NBTB,9,14109,5 OSIS,13,29529,-2 Average,17.1,158286,3.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.1 hedge funds with bullish positions and the average amount invested in these stocks was $158 million. That figure was $251 million in CNK's case. Bed Bath & Beyond Inc. (NASDAQ:BBBY) is the most popular stock in this table. On the other hand NBT Bancorp Inc. (NASDAQ:NBTB) is the least popular one with only 9 bullish hedge fund positions. Cinemark Holdings, Inc. (NYSE:CNK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CNK is 59.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 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 21.3% in 2020 through September 25th and beat the market by 17.7 percentage points. Unfortunately CNK wasn't nearly as popular as these 10 stocks and hedge funds that were betting on CNK were disappointed as the stock returned -9.7% during the same time 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.