In this article you are going to find out whether hedge funds think Collier Creek Holdings (NYSE:CCH) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Collier Creek Holdings (NYSE:CCH) an exceptional stock to buy now? Hedge funds are in a pessimistic mood. The number of bullish hedge fund positions went down by 2 recently. Our calculations also showed that CCH 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. 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 let’s take a glance at the recent hedge fund action regarding Collier Creek Holdings (NYSE:CCH).
Hedge fund activity in Collier Creek Holdings (NYSE:CCH)
Heading into the second quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CCH over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Isaac Corre’s Governors Lane has the most valuable position in Collier Creek Holdings (NYSE:CCH), worth close to $20.5 million, accounting for 2.8% of its total 13F portfolio. Sitting at the No. 2 spot is Glazer Capital, led by Paul Glazer, holding a $18 million position; 1.2% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions include Israel Englander’s Millennium Management, Alec Litowitz and Ross Laser’s Magnetar Capital and David Costen Haley’s HBK Investments. In terms of the portfolio weights assigned to each position Governors Lane allocated the biggest weight to Collier Creek Holdings (NYSE:CCH), around 2.84% of its 13F portfolio. Fort Baker Capital Management is also relatively very bullish on the stock, dishing out 1.91 percent of its 13F equity portfolio to CCH.
Since Collier Creek Holdings (NYSE:CCH) has witnessed a decline in interest from hedge fund managers, it’s easy to see that there exists a select few money managers that slashed their full holdings in the first quarter. Intriguingly, Israel Englander’s Millennium Management dumped the biggest investment of all the hedgies monitored by Insider Monkey, totaling about $15.1 million in stock, and Greg Poole’s Echo Street Capital Management was right behind this move, as the fund dumped about $7.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds in the first quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Collier Creek Holdings (NYSE:CCH) but similarly valued. We will take a look at Nicolet Bankshares Inc. (NASDAQ:NCBS), Abercrombie & Fitch Co. (NYSE:ANF), SilverCrest Metals Inc. (NYSE:SILV), and Repay Holdings Corporation (NASDAQ:RPAY). This group of stocks’ market valuations are closest to CCH’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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 $79 million. That figure was $125 million in CCH’s case. Abercrombie & Fitch Co. (NYSE:ANF) is the most popular stock in this table. On the other hand Nicolet Bankshares Inc. (NASDAQ:NCBS) is the least popular one with only 5 bullish hedge fund positions. Collier Creek Holdings (NYSE:CCH) 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 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on CCH as the stock returned 35.1% in Q2 (through June 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.