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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 December. 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 Carnival plc (NYSE:CUK), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Carnival plc (NYSE:CUK) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 8 hedge funds' portfolios at the end of the fourth quarter of 2018. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Baxter International Inc. (NYSE:BAX), Aon plc (NYSE:AON), and Altaba Inc. (NASDAQ:AABA) to gather more data points.
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 32 percentage points since May 2014 through March 12, 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.
We're going to take a look at the new hedge fund action encompassing Carnival plc (NYSE:CUK).
How have hedgies been trading Carnival plc (NYSE:CUK)?
At Q4's end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 5 hedge funds with a bullish position in CUK 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 Carnival plc (NYSE:CUK) was held by Renaissance Technologies, which reported holding $33.9 million worth of stock at the end of September. It was followed by Marshall Wace LLP with a $20.9 million position. Other investors bullish on the company included Two Sigma Advisors, Arrowstreet Capital, and D E Shaw.
Seeing as Carnival plc (NYSE:CUK) has experienced bearish sentiment from the smart money, it's easy to see that there was a specific group of fund managers that elected to cut their entire stakes in the third quarter. It's worth mentioning that Mike Vranos's Ellington dumped the biggest position of all the hedgies tracked by Insider Monkey, comprising about $0.3 million in stock, and Israel Englander's Millennium Management was right behind this move, as the fund cut about $0.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to Carnival plc (NYSE:CUK). We will take a look at Baxter International Inc. (NYSE:BAX), Aon plc (NYSE:AON), Altaba Inc. (NASDAQ:AABA), and American International Group Inc (NYSE:AIG). All of these stocks' market caps are closest to CUK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BAX,36,3121102,-7 AON,40,2187808,10 AABA,73,12595295,-14 AIG,39,1852935,-2 Average,47,4939285,-3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 47 hedge funds with bullish positions and the average amount invested in these stocks was $4939 million. That figure was $85 million in CUK's case. Altaba Inc. (NASDAQ:AABA) is the most popular stock in this table. On the other hand Baxter International Inc. (NYSE:BAX) is the least popular one with only 36 bullish hedge fund positions. Compared to these stocks Carnival plc (NYSE:CUK) is even less popular than BAX. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. A few hedge funds were also right about betting on CUK, though not to the same extent, as the stock returned 15.4% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
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