Is Carlyle Group Inc (CG) a good stock to buy?
How do you choose the next stock to invest in? One way would be to spend days researching through thousands of publicly traded companies. However, an easier way is to look at stocks that smart investors are collectively bullish on. Hedge funds and other institutional investors typically invest large amounts of capital and should exercise due diligence when deciding their next choice. They don’t always make the right choices, but, on average, their stock choices have historically generated strong returns after adjusting for known risk factors. With that in mind, let’s take a look at recent hedge fund activity around Carlyle Group Inc (NASDAQ: CG).
Is CG a good stock to buy? Carlyle Group Inc (NASDAQ: CG) Investors should pay attention to declining support for the world’s most elite fund managers of late. Carlyle Group Inc (NASDAQ: CG) was listed in 21 hedge fund portfolios at the end of June. The highest all-time high for this statistic is 26. There were 26 hedge funds in our database with holdings in CG at the end of March. Our calculations also showed that CG is not in the top 30 most popular stocks among hedge funds (click for Q2 rank).
The reputation of hedge funds as savvy investors has been tarnished over the past decade, as their hedged returns could not keep up with the unhedged returns of stock indices. Hedge funds have over $ 3.5 trillion in assets under management, so you can’t expect all of their portfolios to beat the market with significant margins. Our research identified in advance a select group of hedge funds that have outperformed S&P 500 ETFs by more than 79 percentage points since March 2017 (see details here). So you can still find a lot of gems by following the movements of hedge funds today.
Robert Pohly of Samlyn Capital
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Do hedge funds think CG is a good stock to buy now?
At the end of the second quarter, 21 of the hedge funds tracked by Insider Monkey were long on this stock, a change of -19% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position on CG a year ago. With the change in the hands of smart money capital, there is a “next level” of key hedge fund managers who were significantly increasing their holdings (or already building up significant positions).
Of these funds, Alkeon Capital Management held the largest stake in Carlyle Group Inc (NASDAQ: CG), which stood at $ 274.4 million at the end of the second quarter. In second place was Samlyn Capital, which raised $ 107.2 million in shares. Markel Gayner Asset Management, Schonfeld Strategic Advisors and Moore Global Investments were also very fond of the stock, becoming one of the firm’s largest hedge fund holders. In terms of the portfolio weights assigned to each position, Callodine Capital Management assigned the largest weight to Carlyle Group Inc (NASDAQ: CG), approximately 3.33% of its 13F portfolio. Samlyn Capital is also relatively very bullish on the stock, allocating 1.57% of its 13F equity portfolio to CG.
Due to the fact that Carlyle Group Inc (NASDAQ: CG) faced a decline in smart money interest, we can see that there was a specific group of fund managers who were completely abandoning their positions at the end of second trimester. Interestingly, Sander Gerber’s Hudson Bay Capital Management ditched most of the “top crust” of funds tracked by Insider Monkey, estimated to be worth $ 4.4 million in shares, and Full18 Capital d. ‘Allon Hellmann was right behind that move, with the fund dropping around $ 3.9. million worth. These transactions are important to note, as total hedge fund interest fell by 5 funds at the end of the second quarter.
Let’s review hedge fund activity in other stocks – not necessarily in the same industry as Carlyle Group Inc (NASDAQ: CG) but of similar value. These stocks are Brookfield Infrastructure Partners LP (NYSE: BIP), Elanco Animal Health Incorporated (NYSE: ELAN), Wix.Com Ltd (NASDAQ: WIX), ON Semiconductor Corporation (NASDAQ: ON), Markel Corporation (NYSE: MKL), TAL Education Group (NYSE: TAL) and WPP Plc (NASDAQ: WPP). The market valuations of this group of stocks resemble the market valuation of CG.
[table] Ticker, number of HF with positions, total value of HF positions (x1000), change of HF position BIP, 16.71356.4 ELAN, 42.1996818.0 WIX, 35.1381019, -5 ON, 44.1021403.3 MKL, 33 709075.3 TAL, 27 606671, -11 WPP, 6 23931.1 Medium, 29 830039, -0.7 [/table]
Check the table here if you have formatting issues.
As you can see, these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $ 830 million. That figure was $ 602 million in the case of CG. ON Semiconductor Corporation (NASDAQ: ON) is the most popular stock in this table. On the other hand, WPP Plc (NASDAQ: WPP) is the least popular with only 6 bullish hedge fund positions. Carlyle Group Inc (NASDAQ: CG) isn’t the least popular stock in this group, but hedge fund interest is still below average. Our overall hedge fund sentiment score for CG is 44. Stocks with a 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 the 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020 and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22 and have consistently beaten the market by 1.6 percentage points. A small number of hedge funds were also right to bet on CG as the stock has returned 18.7% since the end of the second quarter (through 10/22) and has outperformed the market by an even larger margin.
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Disclosure: none. This article originally appeared on Insider Monkey.