Hedge Funds Are Dumping Chemung Financial Corporation (CHMG)

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Chemung Financial Corporation (NASDAQ:CHMG) in this article.

Chemung Financial Corporation (NASDAQ:CHMG) was in 3 hedge funds’ portfolios at the end of September. CHMG investors should pay attention to a decrease in hedge fund sentiment lately. There were 4 hedge funds in our database with CHMG positions at the end of the previous quarter. Our calculations also showed that CHMG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Matthew Lindenbaum Basswood Capital

Matthew Lindenbaum of Basswood Capital

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 as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s go over the new hedge fund action regarding Chemung Financial Corporation (NASDAQ:CHMG).

Hedge fund activity in Chemung Financial Corporation (NASDAQ:CHMG)

At Q3’s end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CHMG over the last 17 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

More specifically, Basswood Capital was the largest shareholder of Chemung Financial Corporation (NASDAQ:CHMG), with a stake worth $5.2 million reported as of the end of September. Trailing Basswood Capital was Renaissance Technologies, which amassed a stake valued at $3.6 million. Royce & Associates was 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 Basswood Capital allocated the biggest weight to Chemung Financial Corporation (NASDAQ:CHMG), around 0.38% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to CHMG.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: EJF Capital. 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 none of the 750+ hedge funds tracked by Insider Monkey identified CHMG as a viable investment and initiated a position in the stock.

Let’s also examine hedge fund activity in other stocks similar to Chemung Financial Corporation (NASDAQ:CHMG). We will take a look at First Bank (NASDAQ:FRBA), Athersys, Inc. (NASDAQ:ATHX), Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX), and Genie Energy Ltd (NYSE:GNE). This group of stocks’ market valuations are closest to CHMG’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FRBA 4 5626 1
ATHX 6 1741 1
SNDX 7 36930 -1
GNE 12 10827 2
Average 7.25 13781 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $10 million in CHMG’s case. Genie Energy Ltd (NYSE:GNE) is the most popular stock in this table. On the other hand First Bank (NASDAQ:FRBA) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Chemung Financial Corporation (NASDAQ:CHMG) is even less popular than FRBA. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on CHMG, though not to the same extent, as the stock returned 9% during the fourth quarter (through 11/30) and outperformed the market as well.

Disclosure: None. This article was originally published at Insider Monkey.