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Hedge Funds Are Selling Carter Bank & Trust (CARE)

“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Carter Bank & Trust (NASDAQ:CARE).

Is Carter Bank & Trust (NASDAQ:CARE) a bargain? Money managers are getting less optimistic. The number of bullish hedge fund bets went down by 1 lately. Our calculations also showed that CARE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). CARE was in 4 hedge funds’ portfolios at the end of the third quarter of 2019. There were 5 hedge funds in our database with CARE holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are numerous methods stock market investors can use to appraise publicly traded companies. Two of the most useful methods are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can beat the broader indices by a healthy margin (see the details here).

Joe Huber - Huber Capital Management

Joe Huber of Huber Capital Management

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. Keeping this in mind we’re going to go over the new hedge fund action encompassing Carter Bank & Trust (NASDAQ:CARE).

What does smart money think about Carter Bank & Trust (NASDAQ:CARE)?

At Q3’s end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CARE over the last 17 quarters. 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 publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, MFP Investors, managed by Michael Price, holds the number one position in Carter Bank & Trust (NASDAQ:CARE). MFP Investors has a $15.8 million position in the stock, comprising 2.2% of its 13F portfolio. On MFP Investors’s heels is Third Avenue Management, led by Martin Whitman, holding a $6.4 million position; 0.6% of its 13F portfolio is allocated to the stock. Other peers that hold long positions comprise Lawrence Seidman’s Seidman Investment Partnership, Joe Huber’s Huber Capital Management and . In terms of the portfolio weights assigned to each position Seidman Investment Partnership allocated the biggest weight to Carter Bank & Trust (NASDAQ:CARE), around 4.9% of its 13F portfolio. MFP Investors is also relatively very bullish on the stock, setting aside 2.18 percent of its 13F equity portfolio to CARE.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. 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 CARE as a viable investment and initiated a position in the stock.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Carter Bank & Trust (NASDAQ:CARE) but similarly valued. These stocks are MidWestOne Financial Group, Inc. (NASDAQ:MOFG), Fortuna Silver Mines Inc. (NYSE:FSM), America First Multifamily Investors, L.P. (NASDAQ:ATAX), and Falcon Minerals Corporation (NASDAQ:FLMN). This group of stocks’ market caps resemble CARE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MOFG 9 12095 4
FSM 12 55835 0
ATAX 4 3901 1
FLMN 19 72785 -3
Average 11 36154 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $28 million in CARE’s case. Falcon Minerals Corporation (NASDAQ:FLMN) is the most popular stock in this table. On the other hand America First Multifamily Investors, L.P. (NASDAQ:ATAX) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Carter Bank & Trust (NASDAQ:CARE) is even less popular than ATAX. Hedge funds clearly dropped the ball on CARE as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 CARE as the stock returned 11.8% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.

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

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