Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Canopy Growth Corporation (NYSE:CGC), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is Canopy Growth Corporation (NYSE:CGC) a buy here? The best stock pickers are buying. The number of long hedge fund bets improved by 4 in recent months. Our calculations also showed that CGC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). 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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
[caption id="attachment_27480" align="aligncenter" width="450"] Israel Englander of Millennium Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's take a look at the new hedge fund action regarding Canopy Growth Corporation (NYSE:CGC).
What have hedge funds been doing with Canopy Growth Corporation (NYSE:CGC)?
Heading into the fourth quarter of 2019, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from the second quarter of 2019. By comparison, 16 hedge funds held shares or bullish call options in CGC a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Canopy Growth Corporation (NYSE:CGC) was held by Alkeon Capital Management, which reported holding $91.7 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $11.7 million position. Other investors bullish on the company included Citadel Investment Group, Sculptor Capital, and EMS Capital. In terms of the portfolio weights assigned to each position Alkeon Capital Management allocated the biggest weight to Canopy Growth Corporation (NYSE:CGC), around 0.32% of its 13F portfolio. Beech Hill Partners is also relatively very bullish on the stock, earmarking 0.24 percent of its 13F equity portfolio to CGC.
Now, specific money managers have jumped into Canopy Growth Corporation (NYSE:CGC) headfirst. Renaissance Technologies, assembled the most outsized position in Canopy Growth Corporation (NYSE:CGC). Renaissance Technologies had $11.7 million invested in the company at the end of the quarter. Sculptor Capital also made a $3.4 million investment in the stock during the quarter. The other funds with brand new CGC positions are Edmond M. Safra's EMS Capital, David E. Shaw's D E Shaw, and Israel Englander's Millennium Management.
Let's now take a look at hedge fund activity in other stocks similar to Canopy Growth Corporation (NYSE:CGC). We will take a look at Ares Capital Corporation (NASDAQ:ARCC), Coty Inc (NYSE:COTY), Masimo Corporation (NASDAQ:MASI), and Newell Brands Inc. (NASDAQ:NWL). This group of stocks' market valuations are closest to CGC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ARCC,21,225163,-2 COTY,22,138577,3 MASI,27,200916,-1 NWL,29,1434678,0 Average,24.75,499834,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $500 million. That figure was $23 million in CGC's case. Newell Brands Inc. (NASDAQ:NWL) is the most popular stock in this table. On the other hand Ares Capital Corporation (NASDAQ:ARCC) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Canopy Growth Corporation (NYSE:CGC) is even less popular than ARCC. Hedge funds dodged a bullet by taking a bearish stance towards CGC. 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 CGC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CGC investors were disappointed as the stock returned -18.9% 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.