You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
CYS Investments Inc (NYSE:CYS) investors should pay attention to an increase in hedge fund interest in recent months. CYS was in 12 hedge funds’ portfolios at the end of September. There were 8 hedge funds in our database with CYS positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Celestica Inc. (USA) (NYSE:CLS), AlarmCom Hldg Inc (NASDAQ:ALRM), and Bank of N.T. Butterfield & Son Ltd (NYSE:NTB) to gather more data points.
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
Now, we’re going to take a peek at the latest action encompassing CYS Investments Inc (NYSE:CYS).
What have hedge funds been doing with CYS Investments Inc (NYSE:CYS)?
Heading into the fourth quarter of 2016, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a jump of 50% from the second quarter of 2016. By comparison, 5 hedge funds held shares or bullish call options in CYS heading into this year. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Ken Griffin’s Citadel Investment Group has the largest position in CYS Investments Inc (NYSE:CYS), worth close to $11.5 million, corresponding to less than 0.1% of its total 13F portfolio. The second most bullish fund manager is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $10.7 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish encompass Charles Clough’s Clough Capital Partners, Cliff Asness’s AQR Capital Management and Dmitry Balyasny’s Balyasny Asset Management. 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.
Consequently, key money managers have jumped into CYS Investments Inc (NYSE:CYS) headfirst. Clough Capital Partners, led by Charles Clough, assembled the largest position in CYS Investments Inc (NYSE:CYS). According to its latest 13F filing, the fund had $8.8 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $0.4 million investment in the stock during the quarter. The following funds were also among the new CYS investors: John Overdeck and David Siegel’s Two Sigma Advisors, Mike Vranos’s Ellington, and Matthew Tewksbury’s Stevens Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as CYS Investments Inc (NYSE:CYS) but similarly valued. We will take a look at Celestica Inc. (USA) (NYSE:CLS), AlarmCom Hldg Inc (NASDAQ:ALRM), Bank of N.T. Butterfield & Son Ltd (NYSE:NTB), and American Axle & Manufact. Holdings, Inc. (NYSE:AXL). This group of stocks’ market valuations are closest to CYS’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $112 million. That figure was $35 million in CYS’s case. American Axle & Manufact. Holdings, Inc. (NYSE:AXL) is the most popular stock in this table. On the other hand AlarmCom Hldg Inc (NASDAQ:ALRM) is the least popular one with only 8 bullish hedge fund positions. CYS Investments Inc (NYSE:CYS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AXL might be a better candidate to consider taking a long position in.