We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Comerica Incorporated (NYSE:CMA) and determine whether hedge funds skillfully traded this stock.
Is Comerica Incorporated (NYSE:CMA) a buy, sell, or hold? Investors who are in the know were becoming less confident. The number of long hedge fund bets were trimmed by 3 lately. Our calculations also showed that CMA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). CMA was in 33 hedge funds’ portfolios at the end of March. There were 36 hedge funds in our database with CMA positions at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the key hedge fund action regarding Comerica Incorporated (NYSE:CMA).
Hedge fund activity in Comerica Incorporated (NYSE:CMA)
At Q1’s end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CMA over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the most valuable position in Comerica Incorporated (NYSE:CMA). AQR Capital Management has a $46.6 million position in the stock, comprising 0.1% of its 13F portfolio. On AQR Capital Management’s heels is Two Sigma Advisors, managed by John Overdeck and David Siegel, which holds a $38.7 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions encompass D. E. Shaw’s D E Shaw, Phill Gross and Robert Atchinson’s Adage Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position MSDC Management allocated the biggest weight to Comerica Incorporated (NYSE:CMA), around 4.84% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, earmarking 1.62 percent of its 13F equity portfolio to CMA.
Since Comerica Incorporated (NYSE:CMA) has witnessed a decline in interest from the smart money, it’s easy to see that there was a specific group of fund managers that elected to cut their entire stakes in the first quarter. At the top of the heap, Michael Kharitonov and Jon David McAuliffe’s Voleon Capital sold off the largest investment of the “upper crust” of funds watched by Insider Monkey, comprising close to $6.3 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also said goodbye to its stock, about $3.7 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 3 funds in the first quarter.
Let’s go over hedge fund activity in other stocks similar to Comerica Incorporated (NYSE:CMA). These stocks are Beyond Meat, Inc. (NASDAQ:BYND), Syneos Health, Inc. (NASDAQ:SYNH), The Mosaic Company (NYSE:MOS), and 51job, Inc. (NASDAQ:JOBS). This group of stocks’ market caps are similar to CMA’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $157 million. That figure was $255 million in CMA’s case. The Mosaic Company (NYSE:MOS) is the most popular stock in this table. On the other hand 51job, Inc. (NASDAQ:JOBS) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Comerica Incorporated (NYSE:CMA) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on CMA as the stock returned 32.2% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.