The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May and August as this time China pivoted and Trump put more pressure on China by increasing tariffs. Fourth quarter brought optimism to the markets and hedge funds’ top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 37.4% through the end of November, vs. a gain of 27.5% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards CBTX, Inc. (NASDAQ:CBTX), and what that likely means for the prospects of the company and its stock.
Hedge fund interest in CBTX, Inc. (NASDAQ:CBTX) 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 CBTX to other stocks including Corporacion America Airports SA (NYSE:CAAP), Cerus Corporation (NASDAQ:CERS), and Tutor Perini Corp (NYSE:TPC) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most traders, hedge funds are viewed as underperforming, old investment vehicles of years past. While there are over 8000 funds trading at the moment, Our experts look at the crème de la crème of this group, about 750 funds. Most estimates calculate that this group of people manage bulk of all hedge funds’ total asset base, and by following their first-class equity investments, Insider Monkey has come up with a few investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s view the key hedge fund action regarding CBTX, Inc. (NASDAQ:CBTX).
How have hedgies been trading CBTX, Inc. (NASDAQ:CBTX)?
At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in CBTX over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Among these funds, Millennium Management held the most valuable stake in CBTX, Inc. (NASDAQ:CBTX), which was worth $3.5 million at the end of the third quarter. On the second spot was Mendon Capital Advisors which amassed $3.3 million worth of shares. Renaissance Technologies, Two Sigma Advisors, and D E Shaw 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 Mendon Capital Advisors allocated the biggest weight to CBTX, Inc. (NASDAQ:CBTX), around 0.55% of its 13F portfolio. Millennium Management is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to CBTX.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: AlphaOne Capital Partners. 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 Winton Capital Management).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as CBTX, Inc. (NASDAQ:CBTX) but similarly valued. These stocks are Corporacion America Airports SA (NYSE:CAAP), Cerus Corporation (NASDAQ:CERS), Tutor Perini Corp (NYSE:TPC), and RadNet Inc. (NASDAQ:RDNT). This group of stocks’ market valuations resemble CBTX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CAAP | 11 | 27126 | 0 |
| CERS | 8 | 84245 | -5 |
| TPC | 9 | 6194 | 3 |
| RDNT | 14 | 72325 | 3 |
| Average | 10.5 | 47473 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $10 million in CBTX’s case. RadNet Inc. (NASDAQ:RDNT) is the most popular stock in this table. On the other hand Cerus Corporation (NASDAQ:CERS) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks CBTX, Inc. (NASDAQ:CBTX) is even less popular than CERS. Hedge funds dodged a bullet by taking a bearish stance towards CBTX. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CBTX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CBTX investors were disappointed as the stock returned 5.9% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
