Core Molding Technologies, Inc. (CMT): Are Hedge Funds Right About This Stock?

Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.

Hedge fund interest in Core Molding Technologies, Inc. (NYSEMKT:CMT) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare CMT to other stocks including DHX Media Ltd (USA) (NASDAQ:DHXM), Corindus Vascular Robotics Inc (NYSEMKT:CVRS), and Kona Grill Inc (NASDAQ:KONA) to get a better sense of its popularity.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

How have hedgies been trading Core Molding Technologies, Inc. (NYSEMKT:CMT)?

Heading into the fourth quarter of 2016, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from one quarter earlier. By comparison, 5 hedge funds held shares or bullish call options in CMT heading into this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Renaissance Technologies, one of the largest hedge funds in the world, has the most valuable position in Core Molding Technologies, Inc. (NYSEMKT:CMT), worth close to $5.2 million, amounting to less than 0.1% of its total 13F portfolio. The second most bullish fund manager is GAMCO Investors, led by Mario Gabelli, holding a $4.7 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish consist of Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, Israel Englander’s Millennium Management and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Laurion Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Two Sigma Advisors).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Core Molding Technologies, Inc. (NYSEMKT:CMT) but similarly valued. We will take a look at DHX Media Ltd (USA) (NASDAQ:DHXM), Corindus Vascular Robotics Inc (NYSEMKT:CVRS), Kona Grill Inc (NASDAQ:KONA), and EVINE Live Inc (NASDAQ:EVLV). This group of stocks’ market values resemble CMT’s market value.

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $12 million in CMT’s case. EVINE Live Inc (NASDAQ:EVLV) is the most popular stock in this table. On the other hand Corindus Vascular Robotics Inc (NYSEMKT:CVRS) is the least popular one with only 4 bullish hedge fund positions. Core Molding Technologies, Inc. (NYSEMKT:CMT) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard EVLV might be a better candidate to consider taking a long position in.

Disclosure: none.