Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don't make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards CoreCivic, Inc. (NYSE:CXW) to find out whether it was one of their high conviction long-term ideas.
CoreCivic, Inc. (NYSE:CXW) has experienced an increase in hedge fund interest of late. CXW was in 21 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 13 hedge funds in our database with CXW positions at the end of the previous quarter. Our calculations also showed that cxw isn't among the 30 most popular stocks among hedge funds.
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 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.
Let's take a gander at the latest hedge fund action regarding CoreCivic, Inc. (NYSE:CXW).
What does the smart money think about CoreCivic, Inc. (NYSE:CXW)?
At the end of the fourth quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 62% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in CXW a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in CoreCivic, Inc. (NYSE:CXW), which was worth $45.2 million at the end of the third quarter. On the second spot was Capital Growth Management which amassed $29.5 million worth of shares. Moreover, Millennium Management, Two Sigma Advisors, and D E Shaw were also bullish on CoreCivic, Inc. (NYSE:CXW), allocating a large percentage of their portfolios to this stock.
Now, key money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the largest position in CoreCivic, Inc. (NYSE:CXW). Arrowstreet Capital had $4.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also made a $4.3 million investment in the stock during the quarter. The following funds were also among the new CXW investors: Minhua Zhang's Weld Capital Management, Paul Tudor Jones's Tudor Investment Corp, and Bruce Kovner's Caxton Associates LP.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as CoreCivic, Inc. (NYSE:CXW) but similarly valued. These stocks are Halozyme Therapeutics, Inc. (NASDAQ:HALO), First Midwest Bancorp Inc (NASDAQ:FMBI), Werner Enterprises, Inc. (NASDAQ:WERN), and Cogent Communications Holdings, Inc. (NASDAQ:CCOI). This group of stocks' market caps are closest to CXW's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HALO,16,199336,-5 FMBI,12,64807,4 WERN,14,104958,-3 CCOI,17,219059,5 Average,14.75,147040,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $147 million. That figure was $143 million in CXW's case. Cogent Communications Holdings, Inc. (NASDAQ:CCOI) is the most popular stock in this table. On the other hand First Midwest Bancorp Inc (NASDAQ:FMBI) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks CoreCivic, Inc. (NYSE:CXW) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on CXW, though not to the same extent, as the stock returned 16.7% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.