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Hedge Funds Are Dumping Comerica Incorporated (CMA)

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Comerica Incorporated (NYSE:CMA).

Is Comerica Incorporated (NYSE:CMA) a first-rate stock to buy now? Hedge funds are in a bearish mood. The number of bullish hedge fund positions fell by 4 recently. Our calculations also showed that CMA isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Martin Whitman Third Avenue Management Marty Whitman

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s check out the key hedge fund action encompassing Comerica Incorporated (NYSE:CMA).

How are hedge funds trading Comerica Incorporated (NYSE:CMA)?

Heading into the third quarter of 2019, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CMA over the last 16 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

CMA_oct2019

According to Insider Monkey’s hedge fund database, John Overdeck and David Siegel’s Two Sigma Advisors has the number one position in Comerica Incorporated (NYSE:CMA), worth close to $137.8 million, corresponding to 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $84.8 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish consist of Israel Englander’s Millennium Management, Martin Whitman’s Third Avenue Management and D. E. Shaw’s D E Shaw.

Seeing as Comerica Incorporated (NYSE:CMA) has faced a decline in interest from the smart money, it’s easy to see that there is a sect of hedge funds who sold off their full holdings in the second quarter. At the top of the heap, Fred Cummings’s Elizabeth Park Capital Management cut the biggest investment of all the hedgies monitored by Insider Monkey, comprising about $11.9 million in stock. Mark Lee’s fund, Forest Hill Capital, also cut its stock, about $9.4 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 4 funds in the second quarter.

Let’s now review hedge fund activity in other stocks similar to Comerica Incorporated (NYSE:CMA). We will take a look at NiSource Inc. (NYSE:NI), Cenovus Energy Inc (NYSE:CVE), Suzano S.A. (NYSE:SUZ), and Eastman Chemical Company (NYSE:EMN). This group of stocks’ market valuations are closest to CMA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NI 22 785694 4
CVE 17 596864 -6
SUZ 2 35984 1
EMN 23 379858 -7
Average 16 449600 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $450 million. That figure was $509 million in CMA’s case. Eastman Chemical Company (NYSE:EMN) is the most popular stock in this table. On the other hand Suzano S.A. (NYSE:SUZ) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Comerica Incorporated (NYSE:CMA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CMA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CMA were disappointed as the stock returned -8.2% during the third quarter 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 many of these stocks already outperformed the market in Q3.

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

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