With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was CRA International, Inc. (NASDAQ:CRAI).
Is CRA International, Inc. (NASDAQ:CRAI) going to take off soon? Money managers are becoming more confident. The number of bullish hedge fund bets inched up by 2 recently. Our calculations also showed that CRAI 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.
Let's take a glance at the new hedge fund action regarding CRA International, Inc. (NASDAQ:CRAI).
Hedge fund activity in CRA International, Inc. (NASDAQ:CRAI)
At Q1's end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the fourth quarter of 2018. By comparison, 13 hedge funds held shares or bullish call options in CRAI a year ago. With hedgies' capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
The largest stake in CRA International, Inc. (NASDAQ:CRAI) was held by Renaissance Technologies, which reported holding $24.9 million worth of stock at the end of March. It was followed by GLG Partners with a $7.9 million position. Other investors bullish on the company included Millennium Management, AQR Capital Management, and Marshall Wace LLP.
Consequently, key hedge funds have been driving this bullishness. Winton Capital Management, managed by David Harding, initiated the largest position in CRA International, Inc. (NASDAQ:CRAI). Winton Capital Management had $0.3 million invested in the company at the end of the quarter. Mike Vranos's Ellington also made a $0.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Hulsizer's PEAK6 Capital Management and Matthew Hulsizer's PEAK6 Capital Management.
Let's go over hedge fund activity in other stocks similar to CRA International, Inc. (NASDAQ:CRAI). These stocks are Health Insurance Innovations Inc (NASDAQ:HIIQ), AudioCodes Ltd. (NASDAQ:AUDC), Century Bancorp, Inc. (NASDAQ:CNBKA), and Ultra Clean Holdings Inc (NASDAQ:UCTT). All of these stocks' market caps resemble CRAI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HIIQ,22,154293,4 AUDC,14,21544,3 CNBKA,2,11330,-1 UCTT,9,45721,-1 Average,11.75,58222,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $61 million in CRAI's case. Health Insurance Innovations Inc (NASDAQ:HIIQ) is the most popular stock in this table. On the other hand Century Bancorp, Inc. (NASDAQ:CNBKA) is the least popular one with only 2 bullish hedge fund positions. CRA International, Inc. (NASDAQ:CRAI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 CRAI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CRAI were disappointed as the stock returned -26.9% 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 so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.