At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards CoStar Group Inc (NASDAQ:CSGP) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Is CoStar Group Inc (NASDAQ:CSGP) the right pick for your portfolio? The smart money was in an optimistic mood. The number of long hedge fund bets advanced by 10 in recent months. CoStar Group Inc (NASDAQ:CSGP) was in 50 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 53. Our calculations also showed that CSGP isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most stock holders, hedge funds are viewed as slow, old financial tools of the past. While there are greater than 8000 funds in operation at present, Our researchers look at the top tier of this group, about 850 funds. These investment experts control bulk of the smart money's total asset base, and by keeping track of their matchless investments, Insider Monkey has figured out 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 annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Aaron Cowen Suvretta Capital
Aaron Cowen of Suvretta Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. 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 precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind we're going to take a glance at the latest hedge fund action surrounding CoStar Group Inc (NASDAQ:CSGP).
What have hedge funds been doing with CoStar Group Inc (NASDAQ:CSGP)?
At second quarter's end, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from one quarter earlier. By comparison, 32 hedge funds held shares or bullish call options in CSGP a year ago. With hedgies' capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Akre Capital Management, managed by Charles Akre, holds the largest position in CoStar Group Inc (NASDAQ:CSGP). Akre Capital Management has a $678.9 million position in the stock, comprising 5.1% of its 13F portfolio. The second most bullish fund manager is Robert Joseph Caruso of Select Equity Group, with a $291.4 million position; 1.7% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish comprise Brian Bares's Bares Capital Management, Gabriel Plotkin's Melvin Capital Management and Nancy Zevenbergen's Zevenbergen Capital Investments. In terms of the portfolio weights assigned to each position Wildcat Capital Management allocated the biggest weight to CoStar Group Inc (NASDAQ:CSGP), around 21.02% of its 13F portfolio. Bares Capital Management is also relatively very bullish on the stock, designating 6.52 percent of its 13F equity portfolio to CSGP.
As one would reasonably expect, specific money managers were breaking ground themselves. Alkeon Capital Management, managed by Panayotis Takis Sparaggis, established the largest position in CoStar Group Inc (NASDAQ:CSGP). Alkeon Capital Management had $68.7 million invested in the company at the end of the quarter. Aaron Cowen's Suvretta Capital Management also made a $32.6 million investment in the stock during the quarter. The following funds were also among the new CSGP investors: Adam Parker's Center Lake Capital, Baker Burleson and Stormy Scott's Banbury Partners, and Paul Marshall and Ian Wace's Marshall Wace LLP.
Let's check out hedge fund activity in other stocks similar to CoStar Group Inc (NASDAQ:CSGP). We will take a look at MSCI Inc (NYSE:MSCI), Marriott International Inc (NASDAQ:MAR), ResMed Inc. (NYSE:RMD), SYSCO Corporation (NYSE:SYY), Cintas Corporation (NASDAQ:CTAS), WEC Energy Group, Inc. (NYSE:WEC), and The Clorox Company (NYSE:CLX). This group of stocks' market values match CSGP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MSCI,44,729558,15 MAR,48,2159338,1 RMD,25,224162,-8 SYY,42,2177488,7 CTAS,34,531899,-8 WEC,30,290696,1 CLX,36,1488687,-5 Average,37,1085975,0.4 [/table]
As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $1086 million. That figure was $2267 million in CSGP's case. Marriott International Inc (NASDAQ:MAR) is the most popular stock in this table. On the other hand ResMed Inc. (NYSE:RMD) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks CoStar Group Inc (NASDAQ:CSGP) is more popular among hedge funds. Our overall hedge fund sentiment score for CSGP is 88.3. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 33% in 2020 through the end of August but still managed to beat the market by 23.2 percentage points. Hedge funds were also right about betting on CSGP as the stock returned 19.4% since the end of June and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
