"Value has performed relatively poorly since the 2017 shift, but we believe challenges to the S&P 500’s dominance are mounting and resulting active opportunities away from the index are growing. At some point, this fault line will break, likely on the back of rising rates, and all investors will be reminded that the best time to diversify away from the winners is when it is most painful. The bargain of capturing long-term value may be short-term pain, but enough is eventually enough and it comes time to harvest the benefits.," said Clearbridge Investments in its market commentary. We aren't sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That's why we believe it would be worthwhile to take a look at the hedge fund sentiment on CAE, Inc. (NYSE:CAE) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Is CAE, Inc. (NYSE:CAE) a great investment right now? The best stock pickers are getting less optimistic. The number of long hedge fund positions shrunk by 1 lately. Our calculations also showed that CAE isn't among the 30 most popular stocks among hedge funds.
In the 21st century investor’s toolkit there are plenty of methods investors employ to analyze publicly traded companies. Some of the less utilized methods are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the elite money managers can outperform the market by a significant amount (see the details here).
We're going to check out the new hedge fund action regarding CAE, Inc. (NYSE:CAE).
What have hedge funds been doing with CAE, Inc. (NYSE:CAE)?
Heading into the first quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from one quarter earlier. By comparison, 8 hedge funds held shares or bullish call options in CAE a year ago. With hedgies' capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in CAE, Inc. (NYSE:CAE), which was worth $38.1 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $15.5 million worth of shares. Moreover, GLG Partners, AQR Capital Management, and D E Shaw were also bullish on CAE, Inc. (NYSE:CAE), allocating a large percentage of their portfolios to this stock.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: BlueCrest Capital Mgmt.. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified CAE as a viable investment and initiated a position in the stock.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as CAE, Inc. (NYSE:CAE) but similarly valued. These stocks are Virtu Financial Inc (NASDAQ:VIRT), Elbit Systems Ltd. (NASDAQ:ESLT), Lancaster Colony Corporation (NASDAQ:LANC), and Algonquin Power & Utilities Corp. (NYSE:AQN). All of these stocks' market caps match CAE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VIRT,17,114979,3 ESLT,3,11299,1 LANC,12,257834,-4 AQN,9,24529,3 Average,10.25,102160,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $102 million. That figure was $85 million in CAE's case. Virtu Financial Inc (NASDAQ:VIRT) is the most popular stock in this table. On the other hand Elbit Systems Ltd. (NASDAQ:ESLT) is the least popular one with only 3 bullish hedge fund positions. CAE, Inc. (NYSE:CAE) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on CAE as the stock returned 26.8% and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.