We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article, we look at what those funds think of Calavo Growers, Inc. (NASDAQ:CVGW) based on that data.
Is Calavo Growers, Inc. (NASDAQ:CVGW) ready to rally soon? Hedge funds are getting more optimistic. The number of long hedge fund positions rose by 3 recently. Our calculations also showed that CVGW isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 S&P 500 ETFs by more than 41 percentage points since March 2017 (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 stocks that are in our short portfolio.
[caption id="attachment_26794" align="aligncenter" width="400"] Paul Tudor Jones of Tudor Investment Corp[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager's coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Keeping this in mind we're going to take a gander at the new hedge fund action regarding Calavo Growers, Inc. (NASDAQ:CVGW).
What have hedge funds been doing with Calavo Growers, Inc. (NASDAQ:CVGW)?
At Q4's end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in CVGW a year ago. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Calavo Growers, Inc. (NASDAQ:CVGW), with a stake worth $40 million reported as of the end of September. Trailing Renaissance Technologies was Cardinal Capital, which amassed a stake valued at $30.9 million. Citadel Investment Group, Millennium Management, and GLG Partners 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 Cardinal Capital allocated the biggest weight to Calavo Growers, Inc. (NASDAQ:CVGW), around 0.94% of its 13F portfolio. Ellington is also relatively very bullish on the stock, dishing out 0.31 percent of its 13F equity portfolio to CVGW.
As aggregate interest increased, key money managers have been driving this bullishness. Winton Capital Management, managed by David Harding, established the biggest position in Calavo Growers, Inc. (NASDAQ:CVGW). Winton Capital Management had $6.6 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also made a $1.7 million investment in the stock during the quarter. The other funds with brand new CVGW positions are Michael Gelband's ExodusPoint Capital, John Overdeck and David Siegel's Two Sigma Advisors, and Joel Greenblatt's Gotham Asset Management.
Let's go over hedge fund activity in other stocks similar to Calavo Growers, Inc. (NASDAQ:CVGW). We will take a look at Uniti Group Inc. (NASDAQ:UNIT), Akcea Therapeutics, Inc. (NASDAQ:AKCA), TTM Technologies, Inc. (NASDAQ:TTMI), and S & T Bancorp Inc (NASDAQ:STBA). This group of stocks' market values resemble CVGW's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UNIT,15,157740,-9 AKCA,10,17000,5 TTMI,11,30761,-1 STBA,9,8690,-2 Average,11.25,53548,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $156 million in CVGW's case. Uniti Group Inc. (NASDAQ:UNIT) is the most popular stock in this table. On the other hand S & T Bancorp Inc (NASDAQ:STBA) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Calavo Growers, Inc. (NASDAQ:CVGW) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th and still beat the market by 4.2 percentage points. Unfortunately CVGW wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CVGW were disappointed as the stock returned -31.1% during the three months of 2020 (through April 6th) 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 most of these stocks already outperformed the market in 2020. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.