Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 835 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider Caretrus REIT Inc (NASDAQ:CTRE) for your portfolio? We'll look to this invaluable collective wisdom for the answer.
Caretrus REIT Inc (NASDAQ:CTRE) shareholders have witnessed a decrease in hedge fund sentiment of late. CTRE was in 13 hedge funds' portfolios at the end of the fourth quarter of 2019. There were 16 hedge funds in our database with CTRE holdings at the end of the previous quarter. Our calculations also showed that CTRE isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Today there are tons of tools market participants have at their disposal to appraise stocks. A couple of the most underrated tools are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the top investment managers can beat their index-focused peers by a very impressive amount (see the details here).
[caption id="attachment_221556" align="aligncenter" width="400"] Richard Driehaus of Driehaus Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. With all of this in mind let's review the recent hedge fund action surrounding Caretrus REIT Inc (NASDAQ:CTRE).
What have hedge funds been doing with Caretrus REIT Inc (NASDAQ:CTRE)?
Heading into the first quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in CTRE a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, John Khoury's Long Pond Capital has the biggest position in Caretrus REIT Inc (NASDAQ:CTRE), worth close to $21.5 million, accounting for 0.5% of its total 13F portfolio. Coming in second is Israel Englander of Millennium Management, with a $12.3 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions comprise Dmitry Balyasny's Balyasny Asset Management, Renaissance Technologies and Clint Carlson's Carlson Capital. In terms of the portfolio weights assigned to each position Long Pond Capital allocated the biggest weight to Caretrus REIT Inc (NASDAQ:CTRE), around 0.55% of its 13F portfolio. Eversept Partners is also relatively very bullish on the stock, earmarking 0.43 percent of its 13F equity portfolio to CTRE.
Judging by the fact that Caretrus REIT Inc (NASDAQ:CTRE) has witnessed declining sentiment from hedge fund managers, it's easy to see that there lies a certain "tier" of fund managers that elected to cut their full holdings heading into Q4. Interestingly, Paul Marshall and Ian Wace's Marshall Wace LLP said goodbye to the biggest investment of the "upper crust" of funds watched by Insider Monkey, worth about $4.3 million in stock, and Richard Driehaus's Driehaus Capital was right behind this move, as the fund said goodbye to about $1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 3 funds heading into Q4.
Let's also examine hedge fund activity in other stocks similar to Caretrus REIT Inc (NASDAQ:CTRE). We will take a look at Forward Air Corporation (NASDAQ:FWRD), FormFactor, Inc. (NASDAQ:FORM), Patterson Companies, Inc. (NASDAQ:PDCO), and Apellis Pharmaceuticals, Inc. (NASDAQ:APLS). This group of stocks' market valuations match CTRE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FWRD,20,137214,-1 FORM,22,128673,3 PDCO,25,182608,3 APLS,31,417192,7 Average,24.5,216422,3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $216 million. That figure was $69 million in CTRE's case. Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) is the most popular stock in this table. On the other hand Forward Air Corporation (NASDAQ:FWRD) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Caretrus REIT Inc (NASDAQ:CTRE) is even less popular than FWRD. Hedge funds dodged a bullet by taking a bearish stance towards CTRE. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately CTRE wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CTRE investors were disappointed as the stock returned -28.2% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.