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Were Hedge Funds Right About CAI International Inc (CAI)?

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·6 min read
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Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of CAI International Inc (NYSE:CAI).

Hedge fund interest in CAI International Inc (NYSE:CAI) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that CAI isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Corporacion America Airports SA (NYSE:CAAP), Community Trust Bancorp, Inc. (NASDAQ:CTBI), and Karyopharm Therapeutics Inc (NASDAQ:KPTI) to gather more data points.

In the eyes of most stock holders, hedge funds are perceived as worthless, old investment vehicles of yesteryear. While there are over 8000 funds trading at present, Our researchers choose to focus on the moguls of this club, about 850 funds. These money managers direct the lion's share of all hedge funds' total asset base, and by keeping track of their first-class stock picks, Insider Monkey has come up with a number of investment strategies that have historically outrun the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

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Lee Ainslie of Maverick Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we're going to take a look at the recent hedge fund action regarding CAI International Inc (NYSE:CAI).

Do Hedge Funds Think CAI Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in CAI a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Weiss Asset Management held the most valuable stake in CAI International Inc (NYSE:CAI), which was worth $54.5 million at the end of the fourth quarter. On the second spot was Portolan Capital Management which amassed $29.7 million worth of shares. Arrowstreet Capital, Citadel Investment Group, and D E Shaw 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 Portolan Capital Management allocated the biggest weight to CAI International Inc (NYSE:CAI), around 2.34% of its 13F portfolio. Weiss Asset Management is also relatively very bullish on the stock, designating 1.47 percent of its 13F equity portfolio to CAI.

Due to the fact that CAI International Inc (NYSE:CAI) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there was a specific group of hedgies who were dropping their positions entirely in the first quarter. At the top of the heap, Jeff Osher's No Street Capital dumped the biggest position of all the hedgies tracked by Insider Monkey, valued at an estimated $7.8 million in stock, and Nathaniel August's Mangrove Partners was right behind this move, as the fund cut about $1.5 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as CAI International Inc (NYSE:CAI) but similarly valued. We will take a look at Corporacion America Airports SA (NYSE:CAAP), Community Trust Bancorp, Inc. (NASDAQ:CTBI), Karyopharm Therapeutics Inc (NASDAQ:KPTI), Esperion Therapeutics, Inc. (NASDAQ:ESPR), Endeavour Silver Corp. (NYSE:EXK), HEXO Corp. (NYSE:HEXO), and Bluegreen Vacations Corporation (NYSE:BXG). This group of stocks' market caps match CAI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CAAP,2,2027,-2 CTBI,9,20137,-2 KPTI,21,146474,2 ESPR,17,118866,1 EXK,10,9024,0 HEXO,6,8026,2 BXG,3,2353,0 Average,9.7,43844,0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.7 hedge funds with bullish positions and the average amount invested in these stocks was $44 million. That figure was $124 million in CAI's case. Karyopharm Therapeutics Inc (NASDAQ:KPTI) is the most popular stock in this table. On the other hand Corporacion America Airports SA (NYSE:CAAP) is the least popular one with only 2 bullish hedge fund positions. CAI International Inc (NYSE:CAI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CAI is 74.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Hedge funds were also right about betting on CAI as the stock returned 24.2% since the end of Q1 (through 7/23) 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.