It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 20% in the first 9 months of this year (through September 30th). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 24% during the same 9-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' consensus stock picks generate superior risk-adjusted returns. 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 Caesarstone Ltd. (NASDAQ:CSTE).
Is Caesarstone Ltd. (NASDAQ:CSTE) worth your attention right now? The smart money is becoming hopeful. The number of long hedge fund positions advanced by 3 recently. Our calculations also showed that CSTE isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you'd ask most shareholders, hedge funds are seen as unimportant, outdated financial vehicles of the past. While there are over 8000 funds with their doors open at the moment, We look at the aristocrats of this club, approximately 750 funds. These hedge fund managers shepherd the lion's share of the smart money's total capital, and by paying attention to their top equity investments, Insider Monkey has uncovered a few investment strategies that have historically surpassed the broader indices. Insider Monkey's flagship hedge fund strategy outrun the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, 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 glance at the latest hedge fund action regarding Caesarstone Ltd. (NASDAQ:CSTE).
How have hedgies been trading Caesarstone Ltd. (NASDAQ:CSTE)?
Heading into the third quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. On the other hand, there were a total of 5 hedge funds with a bullish position in CSTE 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.
The largest stake in Caesarstone Ltd. (NASDAQ:CSTE) was held by Hawk Ridge Management, which reported holding $14.1 million worth of stock at the end of March. It was followed by D E Shaw with a $2.8 million position. Other investors bullish on the company included Arrowstreet Capital, Two Sigma Advisors, and Renaissance Technologies.
Consequently, some big names were leading the bulls' herd. Renaissance Technologies assembled the largest position in Caesarstone Ltd. (NASDAQ:CSTE). Renaissance Technologies had $1.4 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also initiated a $0.6 million position during the quarter. The only other fund with a brand new CSTE position is Minhua Zhang's Weld Capital Management.
Let's check out hedge fund activity in other stocks similar to Caesarstone Ltd. (NASDAQ:CSTE). These stocks are Unisys Corporation (NYSE:UIS), Hemisphere Media Group Inc (NASDAQ:HMTV), Clean Energy Fuels Corp (NASDAQ:CLNE), and ChemoCentryx Inc (NASDAQ:CCXI). This group of stocks' market caps match CSTE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UIS,16,46092,-3 HMTV,8,40637,0 CLNE,8,27527,-3 CCXI,17,91601,-6 Average,12.25,51464,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $51 million. That figure was $24 million in CSTE's case. ChemoCentryx Inc (NASDAQ:CCXI) is the most popular stock in this table. On the other hand Hemisphere Media Group Inc (NASDAQ:HMTV) is the least popular one with only 8 bullish hedge fund positions. Caesarstone Ltd.(NASDAQ:CSTE) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on CSTE as the stock returned 10.5% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.