We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards CBS Corporation (NYSE:CBS).
CBS Corporation (NYSE:CBS) shareholders have witnessed an increase in hedge fund sentiment of late. CBS was in 45 hedge funds' portfolios at the end of the third quarter of 2018. There were 39 hedge funds in our database with CBS holdings at the end of the previous quarter. Our calculations also showed that CBS isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to the 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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
We're going to take a gander at the new hedge fund action surrounding CBS Corporation (NYSE:CBS).
How have hedgies been trading CBS Corporation (NYSE:CBS)?
At Q3's end, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the second quarter of 2018. By comparison, 47 hedge funds held shares or bullish call options in CBS heading into this year. With hedgies' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).