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Here’s What Hedge Funds Think About Cantel Medical Corp. (CMD)

Nina Todic

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Cantel Medical Corp. (NYSE:CMD) in this article.

Is Cantel Medical Corp. (NYSE:CMD) a healthy stock for your portfolio? The best stock pickers are taking a bullish view. The number of long hedge fund bets advanced by 5 lately. Our calculations also showed that cmd isn't among the 30 most popular stocks among hedge funds. CMD was in 18 hedge funds' portfolios at the end of March. There were 13 hedge funds in our database with CMD holdings at the end of the previous quarter.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Mario Gabelli

We're going to take a look at the recent hedge fund action encompassing Cantel Medical Corp. (NYSE:CMD).

Hedge fund activity in Cantel Medical Corp. (NYSE:CMD)

Heading into the second quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CMD over the last 15 quarters. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

No of Hedge Funds with CMD Positions

Among these funds, Diker Management held the most valuable stake in Cantel Medical Corp. (NYSE:CMD), which was worth $79 million at the end of the first quarter. On the second spot was Impax Asset Management which amassed $32.1 million worth of shares. Moreover, Select Equity Group, Citadel Investment Group, and GAMCO Investors were also bullish on Cantel Medical Corp. (NYSE:CMD), allocating a large percentage of their portfolios to this stock.

As one would reasonably expect, key hedge funds were leading the bulls' herd. Select Equity Group, managed by Robert Joseph Caruso, initiated the largest position in Cantel Medical Corp. (NYSE:CMD). Select Equity Group had $15.5 million invested in the company at the end of the quarter. Justin John Ferayorni's Tamarack Capital Management also initiated a $2 million position during the quarter. The other funds with brand new CMD positions are Benjamin A. Smith's Laurion Capital Management, Chuck Royce's Royce & Associates, and Brandon Haley's Holocene Advisors.

Let's go over hedge fund activity in other stocks similar to Cantel Medical Corp. (NYSE:CMD). These stocks are AllianceBernstein Holding LP (NYSE:AB), Brandywine Realty Trust (NYSE:BDN), Box, Inc. (NYSE:BOX), and GATX Corporation (NYSE:GATX). This group of stocks' market caps match CMD's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AB,8,20311,1 BDN,15,129274,-2 BOX,32,472060,8 GATX,11,239346,-3 Average,16.5,215248,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $215 million. That figure was $144 million in CMD's case. Box, Inc. (NYSE:BOX) is the most popular stock in this table. On the other hand AllianceBernstein Holding LP (NYSE:AB) is the least popular one with only 8 bullish hedge fund positions. Cantel Medical Corp. (NYSE:CMD) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on CMD as the stock returned 3.3% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.

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