How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding CIRCOR International, Inc. (NYSE:CIR) and determine whether hedge funds had an edge regarding this stock.
Is CIRCOR International, Inc. (NYSE:CIR) a buy right now? Investors who are in the know were betting on the stock. The number of bullish hedge fund bets advanced by 2 lately. Our calculations also showed that CIR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). CIR was in 12 hedge funds' portfolios at the end of the first quarter of 2020. There were 10 hedge funds in our database with CIR holdings at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
Today there are numerous gauges market participants employ to appraise publicly traded companies. A duo of the less utilized gauges are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the elite hedge fund managers can trounce the market by a significant margin (see the details here).
[caption id="attachment_375529" align="aligncenter" width="396"] Mario Gabelli of GAMCO Investors[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's take a gander at the recent hedge fund action encompassing CIRCOR International, Inc. (NYSE:CIR).
Hedge fund activity in CIRCOR International, Inc. (NYSE:CIR)
At Q1's end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CIR over the last 18 quarters. So, let's check out 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, Mario Gabelli's GAMCO Investors has the most valuable position in CIRCOR International, Inc. (NYSE:CIR), worth close to $17.2 million, corresponding to 0.2% of its total 13F portfolio. Coming in second is Royce & Associates, managed by Chuck Royce, which holds a $10.9 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions encompass Amy Minella's Cardinal Capital, Renaissance Technologies and John D. Gillespie's Prospector Partners. In terms of the portfolio weights assigned to each position Cardinal Capital allocated the biggest weight to CIRCOR International, Inc. (NYSE:CIR), around 0.45% of its 13F portfolio. Fondren Management is also relatively very bullish on the stock, earmarking 0.29 percent of its 13F equity portfolio to CIR.
Consequently, key hedge funds have jumped into CIRCOR International, Inc. (NYSE:CIR) headfirst. Renaissance Technologies, established the largest position in CIRCOR International, Inc. (NYSE:CIR). Renaissance Technologies had $1.4 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also made a $0.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Mike Vranos's Ellington, Greg Eisner's Engineers Gate Manager, and Bradley Louis Radoff's Fondren Management.
Let's check out hedge fund activity in other stocks similar to CIRCOR International, Inc. (NYSE:CIR). We will take a look at Sutro Biopharma, Inc. (NASDAQ:STRO), EZCORP Inc (NASDAQ:EZPW), RISE Education Cayman Ltd (NASDAQ:REDU), and GameStop Corp. (NYSE:GME). All of these stocks' market caps match CIR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STRO,13,49596,-1 EZPW,15,49680,-6 REDU,2,733,-1 GME,17,43259,-3 Average,11.75,35817,-2.75 [/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 $36 million. That figure was $42 million in CIR's case. GameStop Corp. (NYSE:GME) is the most popular stock in this table. On the other hand RISE Education Cayman Ltd (NASDAQ:REDU) is the least popular one with only 2 bullish hedge fund positions. CIRCOR International, Inc. (NYSE:CIR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on CIR as the stock returned 119.1% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.