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Does Caesarstone Ltd (NASDAQ:CSTE) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Hedge fund interest in Caesarstone Ltd (NASDAQ:CSTE) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare CSTE to other stocks including City Office REIT Inc (NYSE:CIO), Flushing Financial Corporation (NASDAQ:FFIC), and Dorian LPG Ltd (NYSE:LPG) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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Ken Griffin of Citadel Investment Group[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We're going to review the latest hedge fund action regarding Caesarstone Ltd (NASDAQ:CSTE).
How are hedge funds trading Caesarstone Ltd (NASDAQ:CSTE)?
Heading into the fourth quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CSTE over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Hawk Ridge Management was the largest shareholder of Caesarstone Ltd (NASDAQ:CSTE), with a stake worth $11.2 million reported as of the end of September. Trailing Hawk Ridge Management was Arrowstreet Capital, which amassed a stake valued at $5 million. Renaissance Technologies, D E Shaw, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Hawk Ridge Management allocated the biggest weight to Caesarstone Ltd (NASDAQ:CSTE), around 2.25% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, earmarking 0.04 percent of its 13F equity portfolio to CSTE.
Because Caesarstone Ltd (NASDAQ:CSTE) has witnessed a decline in interest from the entirety of the hedge funds we track, it's easy to see that there is a sect of hedgies that decided to sell off their full holdings by the end of the third quarter. It's worth mentioning that Donald Sussman's Paloma Partners said goodbye to the largest position of the 750 funds watched by Insider Monkey, worth an estimated $0.2 million in stock. Matthew Hulsizer's fund, PEAK6 Capital Management, also dropped its stock, about $0.2 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks similar to Caesarstone Ltd (NASDAQ:CSTE). These stocks are City Office REIT Inc (NYSE:CIO), Flushing Financial Corporation (NASDAQ:FFIC), Dorian LPG Ltd (NYSE:LPG), and Borr Drilling Limited (NYSE:BORR). All of these stocks' market caps are similar to CSTE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CIO,11,73563,5 FFIC,12,43530,4 LPG,19,141816,9 BORR,5,35995,5 Average,11.75,73726,5.75 [/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 $74 million. That figure was $28 million in CSTE's case. Dorian LPG Ltd (NYSE:LPG) is the most popular stock in this table. On the other hand Borr Drilling Limited (NYSE:BORR) is the least popular one with only 5 bullish hedge fund positions. Caesarstone Ltd (NASDAQ:CSTE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CSTE wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CSTE investors were disappointed as the stock returned -4.8% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.