Hedge Funds Cutting Exposure To Colony Capital Inc (CLNY)

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 Colony Capital Inc (NYSE:CLNY).

Is Colony Capital Inc (NYSE:CLNY) undervalued? The best stock pickers are in a pessimistic mood. The number of long hedge fund bets fell by 7 in recent months. Our calculations also showed that CLNY 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.

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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a peek at the latest hedge fund action surrounding Colony Capital Inc (NYSE:CLNY).

What have hedge funds been doing with Colony Capital Inc (NYSE:CLNY)?

Heading into the second quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -28% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CLNY over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CLNY A Good Stock To Buy?

Among these funds, Baupost Group held the most valuable stake in Colony Capital Inc (NYSE:CLNY), which was worth $87 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $12 million worth of shares. Citadel Investment Group, MIC Capital Partners, and Odey Asset Management Group were 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 MIC Capital Partners allocated the biggest weight to Colony Capital Inc (NYSE:CLNY), around 2.73% of its 13F portfolio. Baupost Group is also relatively very bullish on the stock, setting aside 1.28 percent of its 13F equity portfolio to CLNY.

Since Colony Capital Inc (NYSE:CLNY) has faced falling interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few hedge funds who sold off their full holdings heading into Q4. Interestingly, Martin Whitman’s Third Avenue Management cut the biggest position of the 750 funds watched by Insider Monkey, totaling an estimated $8.6 million in stock. J. Alan Reid, Jr.’s fund, Forward Management, also sold off its stock, about $7.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 7 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Colony Capital Inc (NYSE:CLNY) but similarly valued. We will take a look at Kadant Inc. (NYSE:KAI), Omega Flex, Inc. (NASDAQ:OFLX), Adient plc (NYSE:ADNT), and Provident Financial Services, Inc. (NYSE:PFS). This group of stocks’ market values are closest to CLNY’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KAI 7 57910 0
OFLX 3 3350 -3
ADNT 32 204928 -4
PFS 12 26202 -4
Average 13.5 73098 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $127 million in CLNY’s case. Adient plc (NYSE:ADNT) is the most popular stock in this table. On the other hand Omega Flex, Inc. (NASDAQ:OFLX) is the least popular one with only 3 bullish hedge fund positions. Colony Capital Inc (NYSE:CLNY) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.4% in 2020 through June 22nd but still beat the market by 15.9 percentage points. Hedge funds were also right about betting on CLNY as the stock returned 50% in Q2 (through June 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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