Was The Smart Money Right About Copart, Inc. (CPRT)?
At Insider Monkey, we pore over the filings of nearly 887 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of December 31st. In this article, we will use that wealth of knowledge to determine whether or not Copart, Inc. (NASDAQ:CPRT) makes for a good investment right now.
Copart, Inc. (NASDAQ:CPRT) was in 46 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 60. CPRT investors should be aware of a decrease in hedge fund interest recently. There were 56 hedge funds in our database with CPRT positions at the end of the third quarter. Our calculations also showed that CPRT isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let's go over the key hedge fund action encompassing Copart, Inc. (NASDAQ:CPRT).
Do Hedge Funds Think CPRT Is A Good Stock To Buy Now?
At the end of December, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CPRT over the last 22 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Among these funds, Praesidium Investment Management Company held the most valuable stake in Copart, Inc. (NASDAQ:CPRT), which was worth $141.3 million at the end of the fourth quarter. On the second spot was Candlestick Capital Management which amassed $136.8 million worth of shares. Gobi Capital, Echo Street Capital Management, and Point72 Asset Management 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 Bayberry Capital Partners allocated the biggest weight to Copart, Inc. (NASDAQ:CPRT), around 9.27% of its 13F portfolio. Gobi Capital is also relatively very bullish on the stock, earmarking 8.53 percent of its 13F equity portfolio to CPRT.
Judging by the fact that Copart, Inc. (NASDAQ:CPRT) has faced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there was a specific group of hedgies that elected to cut their entire stakes in the fourth quarter. At the top of the heap, Aaron Cowen's Suvretta Capital Management said goodbye to the biggest stake of the "upper crust" of funds tracked by Insider Monkey, totaling about $71 million in stock, and John Smith Clark's Southpoint Capital Advisors was right behind this move, as the fund dropped about $42.1 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 10 funds in the fourth quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Copart, Inc. (NASDAQ:CPRT) but similarly valued. We will take a look at Datadog, Inc. (NASDAQ:DDOG), Chunghwa Telecom Co., Ltd (NYSE:CHT), PACCAR Inc (NASDAQ:PCAR), Bilibili Inc. (NASDAQ:BILI), Eversource Energy (NYSE:ES), Public Service Enterprise Group Incorporated (NYSE:PEG), and Otis Worldwide Corporation (NYSE:OTIS). This group of stocks' market values are similar to CPRT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DDOG,52,2899490,10 CHT,5,157212,0 PCAR,34,418647,0 BILI,46,3083768,9 ES,24,511581,4 PEG,28,374371,5 OTIS,59,2512029,6 Average,35.4,1422443,4.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.4 hedge funds with bullish positions and the average amount invested in these stocks was $1422 million. That figure was $1138 million in CPRT's case. Otis Worldwide Corporation (NYSE:OTIS) is the most popular stock in this table. On the other hand Chunghwa Telecom Co., Ltd (NYSE:CHT) is the least popular one with only 5 bullish hedge fund positions. Copart, Inc. (NASDAQ:CPRT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CPRT is 56. 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. This is a slightly positive signal but 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 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and beat the market again by 1.6 percentage points. Unfortunately CPRT wasn't nearly as popular as these 10 stocks and hedge funds that were betting on CPRT were disappointed as the stock returned -2.2% since the end of December (through 4/30) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
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