Is City National Corp (NYSE:CYN) a bargain? The smart money is getting less optimistic. The number of bullish hedge fund bets stayed the same which is a slightly negative development in our experience.
To most shareholders, hedge funds are seen as underperforming, old financial tools of years past. While there are greater than 8000 funds in operation today, we at Insider Monkey choose to focus on the top tier of this club, about 450 funds. It is estimated that this group oversees the majority of all hedge funds’ total asset base, and by keeping an eye on their highest performing stock picks, we have spotted a few investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).
Just as important, optimistic insider trading sentiment is another way to parse down the investments you’re interested in. As the old adage goes: there are plenty of motivations for a corporate insider to downsize shares of his or her company, but just one, very simple reason why they would initiate a purchase. Several empirical studies have demonstrated the useful potential of this strategy if “monkeys” know where to look (learn more here).
Consequently, it’s important to take a glance at the recent action regarding City National Corp (NYSE:CYN).
What have hedge funds been doing with City National Corp (NYSE:CYN)?
In preparation for this year, a total of 14 of the hedge funds we track held long positions in this stock, a change of 0% from one quarter earlier. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes substantially.
According to our comprehensive database, John W. Rogers’s Ariel Investments had the most valuable position in City National Corp (NYSE:CYN), worth close to $78 million, comprising 1.6% of its total 13F portfolio. On Ariel Investments’s heels is Dreman Value Management, managed by David Dreman, which held a $13 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other hedge funds with similar optimism include Jim Simons’s Renaissance Technologies, Matthew Lindenbaum’s Basswood Capital and Ric Dillon’s Diamond Hill Capital.
Due to the fact that City National Corp (NYSE:CYN) has faced a declination in interest from the entirety of the hedge funds we track, we can see that there was a specific group of money managers that elected to cut their full holdings last quarter. Interestingly, Israel Englander’s Millennium Management said goodbye to the biggest position of all the hedgies we key on, totaling close to $7 million in stock., and Anil Stevens and Glenn Shapiro of Parameter Capital Management was right behind this move, as the fund sold off about $4 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Insider trading activity in City National Corp (NYSE:CYN)
Insider buying is best served when the company we’re looking at has experienced transactions within the past 180 days. Over the latest six-month time period, City National Corp (NYSE:CYN) has experienced zero unique insiders purchasing, and 3 insider sales (see the details of insider trades here).
Let’s also examine hedge fund and insider activity in other stocks similar to City National Corp (NYSE:CYN). These stocks are Cathay General Bancorp (NASDAQ:CATY), Zions Bancorporation (NASDAQ:ZION), Bank of Hawaii Corporation (NYSE:BOH), East West Bancorp, Inc. (NASDAQ:EWBC), and SVB Financial Group (NASDAQ:SIVB). This group of stocks are the members of the regional – pacific banks industry and their market caps match CYN’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Cathay General Bancorp (NASDAQ:CATY)||7||1||5|
|Zions Bancorporation (NASDAQ:ZION)||21||3||5|
|Bank of Hawaii Corporation (NYSE:BOH)||6||0||5|
|East West Bancorp, Inc. (NASDAQ:EWBC)||16||0||2|
|SVB Financial Group (NASDAQ:SIVB)||15||0||11|
With the returns demonstrated by the aforementioned strategies, retail investors must always monitor hedge fund and insider trading activity, and City National Corp (NYSE:CYN) is an important part of this process.
Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.