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Hedge Funds Souring On Collectors Universe, Inc. (CLCT)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Collectors Universe, Inc. (NASDAQ:CLCT) based on that data.

Collectors Universe, Inc. (NASDAQ:CLCT) has seen a decrease in hedge fund interest recently. Our calculations also showed that CLCT 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.

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.

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Now we’re going to take a look at the latest hedge fund action encompassing Collectors Universe, Inc. (NASDAQ:CLCT).

How are hedge funds trading Collectors Universe, Inc. (NASDAQ:CLCT)?

Heading into the second quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the fourth quarter of 2019. On the other hand, there were a total of 7 hedge funds with a bullish position in CLCT a year ago. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Is CLCT A Good Stock To Buy?

Among these funds, Renaissance Technologies held the most valuable stake in Collectors Universe, Inc. (NASDAQ:CLCT), which was worth $12.6 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $4.7 million worth of shares. Royce & Associates, G2 Investment Partners Management, and Arrowstreet Capital 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 G2 Investment Partners Management allocated the biggest weight to Collectors Universe, Inc. (NASDAQ:CLCT), around 0.81% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.05 percent of its 13F equity portfolio to CLCT.

Due to the fact that Collectors Universe, Inc. (NASDAQ:CLCT) has experienced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedgies who sold off their full holdings last quarter. Intriguingly, Ken Griffin’s Citadel Investment Group said goodbye to the biggest investment of all the hedgies monitored by Insider Monkey, worth about $0.7 million in stock. Israel Englander’s fund, Millennium Management, also cut its stock, about $0.3 million worth. These moves are important to note, as total hedge fund interest fell by 2 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Collectors Universe, Inc. (NASDAQ:CLCT) but similarly valued. These stocks are Cambium Networks Corporation (NASDAQ:CMBM), Ohio Valley Banc Corp. (NASDAQ:OVBC), Nabors Industries Ltd. (NYSE:NBR), and Velocity Financial, Inc. (NYSE:VEL). All of these stocks’ market caps are closest to CLCT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CMBM 2 1013 -2
OVBC 1 1244 0
NBR 20 18074 -1
VEL 6 22821 6
Average 7.25 10788 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $27 million in CLCT’s case. Nabors Industries Ltd. (NYSE:NBR) is the most popular stock in this table. On the other hand Ohio Valley Banc Corp. (NASDAQ:OVBC) is the least popular one with only 1 bullish hedge fund positions. Collectors Universe, Inc. (NASDAQ:CLCT) 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 12.2% in 2020 through June 17th but still beat the market by 14.8 percentage points. Hedge funds were also right about betting on CLCT as the stock returned 75% in Q2 (through June 17th) 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.