Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Companhia Brasileira de Distrib. (NYSE:CBD) to find out whether there were any major changes in hedge funds’ views.
Is CBD a good stock to buy? Hedge fund interest in Companhia Brasileira de Distrib. (NYSE:CBD) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that CBD isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare CBD to other stocks including Hims & Hers Health, Inc. (NYSE:HIMS), Sandy Spring Bancorp Inc. (NASDAQ:SASR), and Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) to get a better sense of its popularity.
In today’s marketplace there are plenty of gauges shareholders have at their disposal to value publicly traded companies. Two of the most under-the-radar gauges are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the top hedge fund managers can outpace the market by a solid margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website .
Bruce Kovner of Caxton Associates LP
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Do Hedge Funds Think CBD Is A Good Stock To Buy Now?
At second quarter’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CBD over the last 24 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Israel Englander’s Millennium Management has the number one position in Companhia Brasileira de Distrib. (NYSE:CBD), worth close to $2.8 million, accounting for less than 0.1%% of its total 13F portfolio. Coming in second is Renaissance Technologies, which holds a $2 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions encompass Ken Griffin’s Citadel Investment Group, Bruce Kovner’s Caxton Associates LP and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Portland Hill Asset Management allocated the biggest weight to Companhia Brasileira de Distrib. (NYSE:CBD), around 0.14% of its 13F portfolio. Caxton Associates LP is also relatively very bullish on the stock, setting aside 0.05 percent of its 13F equity portfolio to CBD.
Seeing as Companhia Brasileira de Distrib. (NYSE:CBD) has experienced falling interest from hedge fund managers, it’s safe to say that there were a few funds who sold off their positions entirely in the second quarter. Intriguingly, David Kowitz and Sheldon Kasowitz’s Indus Capital dropped the biggest investment of the “upper crust” of funds followed by Insider Monkey, worth close to $6.4 million in stock. Ryan Tolkin (CIO)’s fund, Schonfeld Strategic Advisors, also dumped its stock, about $0.8 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Companhia Brasileira de Distrib. (NYSE:CBD) but similarly valued. We will take a look at Hims & Hers Health, Inc. (NYSE:HIMS), Sandy Spring Bancorp Inc. (NASDAQ:SASR), Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), United Natural Foods, Inc. (NASDAQ:UNFI), Myovant Sciences Ltd. (NYSE:MYOV), Morphic Holding, Inc. (NASDAQ:MORF), and Raven Industries, Inc. (NASDAQ:RAVN). This group of stocks’ market caps are similar to CBD’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HIMS,22,260299,4 SASR,11,33624,-1 IRWD,28,498451,0 UNFI,15,83283,-8 MYOV,18,103196,3 MORF,19,419655,-3 RAVN,22,265003,6 Average,19.3,237644,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.3 hedge funds with bullish positions and the average amount invested in these stocks was $238 million. That figure was $8 million in CBD’s case. Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) is the most popular stock in this table. On the other hand Sandy Spring Bancorp Inc. (NASDAQ:SASR) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Companhia Brasileira de Distrib. (NYSE:CBD) is even less popular than SASR. Our overall hedge fund sentiment score for CBD is 28.1. 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 dodged a bullet by taking a bearish stance towards CBD. Our calculations showed that the top 5 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th but managed to beat the market again by 6.2 percentage points. Unfortunately CBD wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); CBD investors were disappointed as the stock returned -36.3% since the end of the second quarter (through 9/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.