Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the third quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of CAE, Inc. (NYSE:CAE) based on that data.
Is CAE a good stock to buy now? Prominent investors were getting less bullish. The number of bullish hedge fund bets were cut by 2 in recent months. CAE, Inc. (NYSE:CAE) was in 12 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 20. Our calculations also showed that CAE isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 14 hedge funds in our database with CAE positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are dozens of indicators market participants can use to value publicly traded companies. A duo of the best indicators are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the elite hedge fund managers can outperform the S&P 500 by a significant amount (see the details here).
John Overdeck of Two Sigma
John Overdeck of Two Sigma Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Keeping this in mind let's take a look at the recent hedge fund action surrounding CAE, Inc. (NYSE:CAE).
Do Hedge Funds Think CAE Is A Good Stock To Buy Now?
At third quarter's end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the second quarter of 2020. On the other hand, there were a total of 11 hedge funds with a bullish position in CAE a year ago. 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, Arrowstreet Capital was the largest shareholder of CAE, Inc. (NYSE:CAE), with a stake worth $44.5 million reported as of the end of September. Trailing Arrowstreet Capital was Goodnow Investment Group, which amassed a stake valued at $23.7 million. Banbury Partners, Two Sigma Advisors, and Citadel Investment Group 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 Goodnow Investment Group allocated the biggest weight to CAE, Inc. (NYSE:CAE), around 2.68% of its 13F portfolio. Banbury Partners is also relatively very bullish on the stock, setting aside 2.09 percent of its 13F equity portfolio to CAE.
Seeing as CAE, Inc. (NYSE:CAE) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there exists a select few funds that elected to cut their full holdings by the end of the third quarter. At the top of the heap, Donald Sussman's Paloma Partners dropped the largest stake of all the hedgies tracked by Insider Monkey, valued at close to $0.5 million in stock. Matthew Hulsizer's fund, PEAK6 Capital Management, also dumped its stock, about $0.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 2 funds by the end of the third quarter.
Let's now review hedge fund activity in other stocks similar to CAE, Inc. (NYSE:CAE). These stocks are Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN), FTI Consulting, Inc. (NYSE:FCN), Curtiss-Wright Corp. (NYSE:CW), QTS Realty Trust Inc (NYSE:QTS), Shift4 Payments, Inc. (NYSE:FOUR), Parsley Energy Inc (NYSE:PE), and Qualys Inc (NASDAQ:QLYS). This group of stocks' market values resemble CAE's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BHVN,33,751815,-9 FCN,37,388149,5 CW,26,229569,0 QTS,25,454581,-4 FOUR,32,243072,17 PE,37,280826,-2 QLYS,19,114276,-8 Average,29.9,351755,-0.1 [/table]
As you can see these stocks had an average of 29.9 hedge funds with bullish positions and the average amount invested in these stocks was $352 million. That figure was $88 million in CAE's case. FTI Consulting, Inc. (NYSE:FCN) is the most popular stock in this table. On the other hand Qualys Inc (NASDAQ:QLYS) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks CAE, Inc. (NYSE:CAE) is even less popular than QLYS. Our overall hedge fund sentiment score for CAE is 21. 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. Hedge funds clearly dropped the ball on CAE as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on CAE as the stock returned 68.3% since Q3 (through December 8th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
