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). 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 CRA International, Inc. (NASDAQ:CRAI) at the end of the first quarter and determine whether the smart money was really smart about this stock.
CRA International, Inc. (NASDAQ:CRAI) investors should be aware of a decrease in hedge fund interest in recent months. Our calculations also showed that CRAI isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
To the average investor there are several methods market participants can use to analyze publicly traded companies. Some of the best methods 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 beat the broader indices by a very impressive margin (see the details here).
[caption id="attachment_193003" align="aligncenter" width="400"] Chuck Royce of Royce & Associates[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to check out the latest hedge fund action surrounding CRA International, Inc. (NASDAQ:CRAI).
What does smart money think about CRA International, Inc. (NASDAQ:CRAI)?
At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in CRAI a year ago. With the smart money's capital changing hands, there exists a few key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in CRA International, Inc. (NASDAQ:CRAI), which was worth $15.6 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $3.2 million worth of shares. Millennium Management, AQR Capital Management, and Royce & Associates 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 Ancora Advisors allocated the biggest weight to CRA International, Inc. (NASDAQ:CRAI), around 0.09% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to CRAI.
Seeing as CRA International, Inc. (NASDAQ:CRAI) has witnessed a decline in interest from the aggregate hedge fund industry, it's easy to see that there were a few funds that slashed their entire stakes in the first quarter. It's worth mentioning that Peter Algert and Kevin Coldiron's Algert Coldiron Investors cut the largest investment of the 750 funds tracked by Insider Monkey, valued at about $0.6 million in stock. Peter Muller's fund, PDT Partners, also dropped its stock, about $0.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds in the first quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as CRA International, Inc. (NASDAQ:CRAI) but similarly valued. We will take a look at Pure Cycle Corporation (NASDAQ:PCYO), Ethan Allen Interiors Inc. (NYSE:ETH), BJ's Restaurants, Inc. (NASDAQ:BJRI), and McEwen Mining Inc (NYSE:MUX). This group of stocks' market caps are similar to CRAI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PCYO,14,39645,4 ETH,12,19656,-2 BJRI,13,14101,-3 MUX,8,4470,-4 Average,11.75,19468,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $34 million in CRAI's case. Pure Cycle Corporation (NASDAQ:PCYO) is the most popular stock in this table. On the other hand McEwen Mining Inc (NYSE:MUX) is the least popular one with only 8 bullish hedge fund positions. CRA International, Inc. (NASDAQ:CRAI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 gained 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately CRAI wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CRAI investors were disappointed as the stock returned 18.9% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.