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Were Hedge Funds Right About Flocking Into Carpenter Technology Corporation (CRS) ?

Reymerlyn Martin

World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.

Carpenter Technology Corporation (NYSE:CRS) was in 15 hedge funds' portfolios at the end of the fourth quarter of 2018. CRS investors should pay attention to an increase in hedge fund interest of late. There were 14 hedge funds in our database with CRS positions at the end of the previous quarter. Our calculations also showed that CRS isn't among the 30 most popular stocks among hedge funds.

To most traders, hedge funds are perceived as unimportant, outdated investment tools of the past. While there are greater than 8000 funds in operation at present, Our researchers hone in on the leaders of this group, approximately 750 funds. These hedge fund managers manage the lion's share of all hedge funds' total asset base, and by following their finest equity investments, Insider Monkey has unsheathed a few investment strategies that have historically outperformed the market. Insider Monkey's flagship hedge fund strategy defeated the S&P 500 index by nearly 5 percentage points annually since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

Joe Huber - Huber Capital Management

We're going to take a glance at the latest hedge fund action regarding Carpenter Technology Corporation (NYSE:CRS).

What have hedge funds been doing with Carpenter Technology Corporation (NYSE:CRS)?

Heading into the first quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in CRS a year ago. With hedgies' capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

CRS_apr2019

According to Insider Monkey's hedge fund database, Chuck Royce's Royce & Associates has the biggest position in Carpenter Technology Corporation (NYSE:CRS), worth close to $24.6 million, corresponding to 0.2% of its total 13F portfolio. Coming in second is Ken Fisher of Fisher Asset Management, with a $15.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish include Dmitry Balyasny's Balyasny Asset Management, Joe Huber's Huber Capital Management and David Harding's Winton Capital Management.

Now, specific money managers were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, established the most outsized position in Carpenter Technology Corporation (NYSE:CRS). Balyasny Asset Management had $11.1 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also initiated a $2.2 million position during the quarter. The other funds with brand new CRS positions are D. E. Shaw's D E Shaw and Paul Marshall and Ian Wace's Marshall Wace LLP.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Carpenter Technology Corporation (NYSE:CRS) but similarly valued. These stocks are Hilltop Holdings Inc. (NYSE:HTH), LCI Industries (NYSE:LCII), Allscripts Healthcare Solutions Inc (NASDAQ:MDRX), and Belden Inc. (NYSE:BDC). This group of stocks' market caps match CRS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HTH,14,103124,0 LCII,8,79865,-4 MDRX,18,159101,-2 BDC,15,40502,5 Average,13.75,95648,-0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $88 million in CRS's case. Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) is the most popular stock in this table. On the other hand LCI Industries (NYSE:LCII) is the least popular one with only 8 bullish hedge fund positions. Carpenter Technology Corporation (NYSE:CRS) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on CRS as the stock returned 40.3% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.

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