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Hedge Funds Warming Up To Central Pacific Financial Corp. (CPF)

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Central Pacific Financial Corp. (NYSE:CPF).

Central Pacific Financial Corp. (NYSE:CPF) investors should pay attention to an increase in activity from the world’s largest hedge funds of late. Our calculations also showed that CPF isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.

TUDOR INVESTMENT CORP

Paul Tudor Jones of Tudor Investment Corp

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. 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 also rely on the best performing hedge funds‘ buy/sell signals. Let’s review the key hedge fund action encompassing Central Pacific Financial Corp. (NYSE:CPF).

How have hedgies been trading Central Pacific Financial Corp. (NYSE:CPF)?

At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in CPF a year ago. So, let’s find out 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, Renaissance Technologies, holds the number one position in Central Pacific Financial Corp. (NYSE:CPF). Renaissance Technologies has a $23.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Millennium Management, led by Israel Englander, holding a $12.3 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism include John D. Gillespie’s Prospector Partners, Noam Gottesman’s GLG Partners and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Prospector Partners allocated the biggest weight to Central Pacific Financial Corp. (NYSE:CPF), around 1% of its 13F portfolio. Polaris Capital Management is also relatively very bullish on the stock, earmarking 0.1 percent of its 13F equity portfolio to CPF.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Tudor Investment Corp, managed by Paul Tudor Jones, established the largest position in Central Pacific Financial Corp. (NYSE:CPF). Tudor Investment Corp had $0.9 million invested in the company at the end of the quarter. Thomas Bailard’s Bailard Inc also initiated a $0.4 million position during the quarter. The only other fund with a brand new CPF position is Minhua Zhang’s Weld Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Central Pacific Financial Corp. (NYSE:CPF) but similarly valued. These stocks are Goldman Sachs BDC, Inc. (NYSE:GSBD), Nanometrics Incorporated (NASDAQ:NANO), WisdomTree Investments, Inc. (NASDAQ:WETF), and Great Southern Bancorp, Inc. (NASDAQ:GSBC). All of these stocks’ market caps match CPF’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GSBD 2 3362 1
NANO 17 103646 0
WETF 17 56235 5
GSBC 8 26357 0
Average 11 47400 1.5

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 $47 million. That figure was $75 million in CPF’s case. Nanometrics Incorporated (NASDAQ:NANO) is the most popular stock in this table. On the other hand Goldman Sachs BDC, Inc. (NYSE:GSBD) is the least popular one with only 2 bullish hedge fund positions. Central Pacific Financial Corp. (NYSE:CPF) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately CPF wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CPF were disappointed as the stock returned 3.1% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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