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Hedge Funds Are Selling BanColombia S.A. (CIB)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtBanColombia S.A. (NYSE:CIB) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is BanColombia S.A. (NYSE:CIB) the right investment to pursue these days? Investors who are in the know were taking a bearish view. The number of long hedge fund bets decreased by 3 recently. Our calculations also showed that CIB 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). CIB was in 11 hedge funds’ portfolios at the end of the first quarter of 2020. There were 14 hedge funds in our database with CIB positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

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. With all of this in mind we’re going to take a glance at the new hedge fund action regarding BanColombia S.A. (NYSE:CIB).

How have hedgies been trading BanColombia S.A. (NYSE:CIB)?

At Q1’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in CIB a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Polaris Capital Management, managed by Bernard Horn, holds the largest position in BanColombia S.A. (NYSE:CIB). Polaris Capital Management has a $58 million position in the stock, comprising 3.5% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, holding a $10.6 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism encompass Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Paul Marshall and Ian Wace’s Marshall Wace LLP and Robert B. Gillam’s McKinley Capital Management. In terms of the portfolio weights assigned to each position Polaris Capital Management allocated the biggest weight to BanColombia S.A. (NYSE:CIB), around 3.51% of its 13F portfolio. McKinley Capital Management is also relatively very bullish on the stock, earmarking 0.2 percent of its 13F equity portfolio to CIB.

Due to the fact that BanColombia S.A. (NYSE:CIB) has faced falling interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of fund managers who were dropping their entire stakes by the end of the first quarter. Intriguingly, Richard Driehaus’s Driehaus Capital dumped the largest stake of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $31.4 million in stock. Thomas Bailard’s fund, Bailard Inc, also sold off its stock, about $1.9 million worth. These transactions are interesting, as total hedge fund interest dropped by 3 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks similar to BanColombia S.A. (NYSE:CIB). These stocks are Formula One Group (NASDAQ:FWONA), Albemarle Corporation (NYSE:ALB), Vail Resorts, Inc. (NYSE:MTN), and Snap-on Incorporated (NYSE:SNA). All of these stocks’ market caps are similar to CIB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FWONA 17 257605 -5
ALB 24 73093 1
MTN 37 579984 4
SNA 26 285106 -1
Average 26 298947 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $299 million. That figure was $87 million in CIB’s case. Vail Resorts, Inc. (NYSE:MTN) is the most popular stock in this table. On the other hand Formula One Group (NASDAQ:FWONA) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks BanColombia S.A. (NYSE:CIB) is even less popular than FWONA. Hedge funds dodged a bullet by taking a bearish stance towards CIB. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but managed to beat the market by 15.5 percentage points. Unfortunately CIB wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); CIB investors were disappointed as the stock returned 6.7% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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