Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Commerce Bancshares, Inc. (NASDAQ:CBSH)? The smart money sentiment can provide an answer to this question.
Is CBSH a good stock to buy now? The smart money was getting less optimistic. The number of long hedge fund bets dropped by 1 in recent months. Commerce Bancshares, Inc. (NASDAQ:CBSH) was in 15 hedge funds’ portfolios at the end of September. The all time high for this statistic is 16. Our calculations also showed that CBSH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 16 hedge funds in our database with CBSH positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most stock holders, hedge funds are assumed to be slow, old investment tools of yesteryear. While there are greater than 8000 funds in operation at the moment, Our researchers choose to focus on the aristocrats of this group, around 850 funds. These hedge fund managers direct bulk of the smart money’s total asset base, and by following their first-class picks, Insider Monkey has spotted various investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s go over the latest hedge fund action encompassing Commerce Bancshares, Inc. (NASDAQ:CBSH).
Do Hedge Funds Think CBSH Is A Good Stock To Buy Now?
At third quarter’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in CBSH a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Among these funds, AQR Capital Management held the most valuable stake in Commerce Bancshares, Inc. (NASDAQ:CBSH), which was worth $24 million at the end of the third quarter. On the second spot was GLG Partners which amassed $9.3 million worth of shares. Millennium Management, Citadel Investment Group, and Winton Capital Management 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 Winton Capital Management allocated the biggest weight to Commerce Bancshares, Inc. (NASDAQ:CBSH), around 0.11% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, dishing out 0.09 percent of its 13F equity portfolio to CBSH.
Due to the fact that Commerce Bancshares, Inc. (NASDAQ:CBSH) has faced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there exists a select few money managers who sold off their entire stakes last quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management dumped the largest position of all the hedgies monitored by Insider Monkey, comprising an estimated $3.3 million in stock, and Greg Eisner’s Engineers Gate Manager was right behind this move, as the fund dumped about $0.6 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 1 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to Commerce Bancshares, Inc. (NASDAQ:CBSH). We will take a look at Perrigo Co Plc (NYSE:PRGO), CubeSmart (NYSE:CUBE), American Airlines Group Inc (NASDAQ:AAL), Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA), Herbalife Nutrition Ltd. (NYSE:HLF), Vroom, Inc. (NASDAQ:VRM), and Deckers Outdoor Corp (NYSE:DECK). This group of stocks’ market values are similar to CBSH’s market value.
|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 34.7 hedge funds with bullish positions and the average amount invested in these stocks was $848 million. That figure was $51 million in CBSH’s case. Deckers Outdoor Corp (NYSE:DECK) is the most popular stock in this table. On the other hand CubeSmart (NYSE:CUBE) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Commerce Bancshares, Inc. (NASDAQ:CBSH) is even less popular than CUBE. Our overall hedge fund sentiment score for CBSH is 32.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds clearly dropped the ball on CBSH as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on CBSH as the stock returned 18% since Q3 (through December 14th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.