In this article we will check out the progression of hedge fund sentiment towards Community Bank System, Inc. (NYSE:CBU) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is CBU a good stock to buy now? Community Bank System, Inc. (NYSE:CBU) was in 10 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 15. CBU has experienced a decrease in activity from the world’s largest hedge funds of late. There were 15 hedge funds in our database with CBU positions at the end of the second quarter. Our calculations also showed that CBU 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).
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 66 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, 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. With all of this in mind let’s take a peek at the new hedge fund action encompassing Community Bank System, Inc. (NYSE:CBU).
Do Hedge Funds Think CBU Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from the second quarter of 2020. On the other hand, there were a total of 15 hedge funds with a bullish position in CBU a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, GLG Partners was the largest shareholder of Community Bank System, Inc. (NYSE:CBU), with a stake worth $9.8 million reported as of the end of September. Trailing GLG Partners was Balyasny Asset Management, which amassed a stake valued at $2.6 million. Holocene Advisors, Minerva Advisors, and Citadel Investment Group 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 Minerva Advisors allocated the biggest weight to Community Bank System, Inc. (NYSE:CBU), around 0.5% of its 13F portfolio. GLG Partners is also relatively very bullish on the stock, setting aside 0.04 percent of its 13F equity portfolio to CBU.
Seeing as Community Bank System, Inc. (NYSE:CBU) has faced declining sentiment from the smart money, it’s safe to say that there was a specific group of fund managers who sold off their entire stakes last quarter. Intriguingly, Israel Englander’s Millennium Management sold off the largest stake of the 750 funds followed by Insider Monkey, valued at close to $5.8 million in stock. Renaissance Technologies, also sold off its stock, about $2.3 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 5 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Community Bank System, Inc. (NYSE:CBU) but similarly valued. We will take a look at LGI Homes Inc (NASDAQ:LGIH), GW Pharmaceuticals plc (NASDAQ:GWPH), Crane Co. (NYSE:CR), Atlantica Sustainable Infrastructure plc (NASDAQ:AY), Werner Enterprises, Inc. (NASDAQ:WERN), Lexington Realty Trust (NYSE:LXP), and Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH). All of these stocks’ market caps match CBU’s market cap.
|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 23 hedge funds with bullish positions and the average amount invested in these stocks was $232 million. That figure was $17 million in CBU’s case. Werner Enterprises, Inc. (NASDAQ:WERN) is the most popular stock in this table. On the other hand Atlantica Sustainable Infrastructure plc (NASDAQ:AY) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Community Bank System, Inc. (NYSE:CBU) is even less popular than AY. Our overall hedge fund sentiment score for CBU is 20. 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 CBU 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on CBU as the stock returned 19.4% since Q3 (through December 8th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.