Hedge Funds Are Selling Century Bancorp, Inc. (CNBKA)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at 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. In this article we look at what those investors think of Century Bancorp, Inc. (NASDAQ:CNBKA).

Century Bancorp, Inc. (NASDAQ:CNBKA) was in 4 hedge funds’ portfolios at the end of the first quarter of 2020. CNBKA shareholders have witnessed a decrease in hedge fund interest lately. There were 5 hedge funds in our database with CNBKA holdings at the end of the previous quarter. Our calculations also showed that CNBKA 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).

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

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 44 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

David Harding

David Harding of Winton Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s check out the latest hedge fund action surrounding Century Bancorp, Inc. (NASDAQ:CNBKA).

How are hedge funds trading Century Bancorp, Inc. (NASDAQ:CNBKA)?

At Q1’s end, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CNBKA over the last 18 quarters. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the largest position in Century Bancorp, Inc. (NASDAQ:CNBKA). Renaissance Technologies has a $11.2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is David P. Cohen of Minerva Advisors, with a $1.7 million position; 1.3% of its 13F portfolio is allocated to the company. Remaining professional money managers that hold long positions comprise David Harding’s Winton Capital Management, Israel Englander’s Millennium Management and . In terms of the portfolio weights assigned to each position Minerva Advisors allocated the biggest weight to Century Bancorp, Inc. (NASDAQ:CNBKA), around 1.33% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to CNBKA.

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

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Century Bancorp, Inc. (NASDAQ:CNBKA) but similarly valued. We will take a look at Amalgamated Bank (NASDAQ:AMAL), Central Puerto S.A. (NYSE:CEPU), Viking Therapeutics, Inc. (NASDAQ:VKTX), and Tutor Perini Corp (NYSE:TPC). This group of stocks’ market caps are closest to CNBKA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AMAL 12 27523 2
CEPU 6 5446 1
VKTX 17 24942 3
TPC 10 12342 -5
Average 11.25 17563 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $14 million in CNBKA’s case. Viking Therapeutics, Inc. (NASDAQ:VKTX) is the most popular stock in this table. On the other hand Central Puerto S.A. (NYSE:CEPU) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Century Bancorp, Inc. (NASDAQ:CNBKA) is even less popular than CEPU. Hedge funds clearly dropped the ball on CNBKA as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on CNBKA as the stock returned 21.3% so far in the second quarter and outperformed the market by an even larger margin.

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