Here’s What Hedge Funds Think About CBTX, Inc. (CBTX)

Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the third quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds’ top consensus picks. This year hedge funds’ top 20 stock picks outperformed the S&P 500 Index by 4 percentage points through September 30th. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.

CBTX, Inc. (NASDAQ:CBTX) investors should pay attention to a decrease in support from the world’s most elite money managers lately. CBTX was in 7 hedge funds’ portfolios at the end of June. There were 8 hedge funds in our database with CBTX positions at the end of the previous quarter. Our calculations also showed that CBTX isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

AlphaOne Capital Partners' Returns, AUM and Holdings

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a gander at the fresh hedge fund action surrounding CBTX, Inc. (NASDAQ:CBTX).

How have hedgies been trading CBTX, Inc. (NASDAQ:CBTX)?

At Q2’s end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CBTX over the last 16 quarters. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).


Among these funds, Millennium Management held the most valuable stake in CBTX, Inc. (NASDAQ:CBTX), which was worth $6 million at the end of the second quarter. On the second spot was Mendon Capital Advisors which amassed $4.9 million worth of shares. Moreover, D E Shaw, AlphaOne Capital Partners, and Two Sigma Advisors were also bullish on CBTX, Inc. (NASDAQ:CBTX), allocating a large percentage of their portfolios to this stock.

Because CBTX, Inc. (NASDAQ:CBTX) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of funds who were dropping their full holdings last quarter. Interestingly, Mark Lee’s Forest Hill Capital dropped the largest investment of all the hedgies watched by Insider Monkey, valued at about $2.9 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund said goodbye to about $0.4 million worth. These moves are important to note, as total hedge fund interest fell by 1 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to CBTX, Inc. (NASDAQ:CBTX). These stocks are Intellia Therapeutics, Inc. (NASDAQ:NTLA), Arvinas, Inc. (NASDAQ:ARVN), Cornerstone Building Brands, Inc. (NYSE:CNR), and Modine Manufacturing Company (NYSE:MOD). This group of stocks’ market valuations match CBTX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NTLA 12 24081 2
ARVN 13 152734 -1
CNR 15 63239 -2
MOD 20 78255 3
Average 15 79577 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $13 million in CBTX’s case. Modine Manufacturing Company (NYSE:MOD) is the most popular stock in this table. On the other hand Intellia Therapeutics, Inc. (NASDAQ:NTLA) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks CBTX, Inc. (NASDAQ:CBTX) is even less popular than NTLA. Hedge funds dodged a bullet by taking a bearish stance towards CBTX. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CBTX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CBTX investors were disappointed as the stock returned -0.6% during the third quarter 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 in 2019.

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