Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors' favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the second quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds' top consensus picks. This year hedge funds' top 20 stock picks outperformed the S&P 500 Index by 6.6 percentage points through May 30th. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
CBIZ, Inc. (NYSE:CBZ) investors should be aware of an increase in enthusiasm from smart money lately. CBZ was in 16 hedge funds' portfolios at the end of March. There were 12 hedge funds in our database with CBZ holdings at the end of the previous quarter. Our calculations also showed that CBZ isn't among the 30 most popular stocks among hedge funds.
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.
We're going to go over the key hedge fund action encompassing CBIZ, Inc. (NYSE:CBZ).
Hedge fund activity in CBIZ, Inc. (NYSE:CBZ)
At Q1's end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CBZ over the last 15 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in CBIZ, Inc. (NYSE:CBZ) was held by Cardinal Capital, which reported holding $65.1 million worth of stock at the end of March. It was followed by P2 Capital Partners with a $54.5 million position. Other investors bullish on the company included Renaissance Technologies, D E Shaw, and Arrowstreet Capital.
Now, some big names were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most valuable position in CBIZ, Inc. (NYSE:CBZ). Arrowstreet Capital had $5 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also made a $2.1 million investment in the stock during the quarter. The following funds were also among the new CBZ investors: Bruce Kovner's Caxton Associates LP, Noam Gottesman's GLG Partners, and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as CBIZ, Inc. (NYSE:CBZ) but similarly valued. We will take a look at Uxin Limited (NASDAQ:UXIN), Arbor Realty Trust, Inc. (NYSE:ABR), Bluegreen Vacations Corporation (NYSE:BXG), and Standard Motor Products, Inc. (NYSE:SMP). This group of stocks' market valuations are closest to CBZ's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UXIN,7,98223,1 ABR,9,59736,-6 BXG,6,36372,4 SMP,12,129052,1 Average,8.5,80846,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $81 million. That figure was $160 million in CBZ's case. Standard Motor Products, Inc. (NYSE:SMP) is the most popular stock in this table. On the other hand Bluegreen Vacations Corporation (NYSE:BXG) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks CBIZ, Inc. (NYSE:CBZ) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately CBZ wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CBZ were disappointed as the stock returned 0.6% during the same 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 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.