With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Capitol Federal Financial, Inc. (NASDAQ:CFFN).
Is CFFN a good stock to buy now? Capitol Federal Financial, Inc. (NASDAQ:CFFN) has experienced an increase in enthusiasm from smart money recently. Capitol Federal Financial, Inc. (NASDAQ:CFFN) was in 14 hedge funds’ portfolios at the end of September. The all time high for this statistic is 19. Our calculations also showed that CFFN 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 we’re going to review the new hedge fund action encompassing Capitol Federal Financial, Inc. (NASDAQ:CFFN).
Do Hedge Funds Think CFFN Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from the previous quarter. By comparison, 14 hedge funds held shares or bullish call options in CFFN a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Capitol Federal Financial, Inc. (NASDAQ:CFFN), which was worth $69.1 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $2.4 million worth of shares. ExodusPoint Capital, D E Shaw, and Millennium 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 Renaissance Technologies allocated the biggest weight to Capitol Federal Financial, Inc. (NASDAQ:CFFN), around 0.07% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, setting aside 0.05 percent of its 13F equity portfolio to CFFN.
With a general bullishness amongst the heavyweights, specific money managers have jumped into Capitol Federal Financial, Inc. (NASDAQ:CFFN) headfirst. ExodusPoint Capital, managed by Michael Gelband, created the most valuable position in Capitol Federal Financial, Inc. (NASDAQ:CFFN). ExodusPoint Capital had $2.4 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $1.1 million position during the quarter. The following funds were also among the new CFFN investors: Paul Tudor Jones’s Tudor Investment Corp, Dmitry Balyasny’s Balyasny Asset Management, and Karim Abbadi and Edward McBride’s Centiva Capital.
Let’s also examine hedge fund activity in other stocks similar to Capitol Federal Financial, Inc. (NASDAQ:CFFN). These stocks are Coherus Biosciences Inc (NASDAQ:CHRS), Piper Sandler Companies (NYSE:PIPR), Service Properties Trust (NASDAQ:SVC), Zentalis Pharmaceuticals, Inc. (NASDAQ:ZNTL), Whiting Petroleum Corporation (NYSE:WLL), Magnolia Oil & Gas Corporation (NYSE:MGY), and Core-Mark Holding Company, Inc. (NASDAQ:CORE). This group of stocks’ market caps are similar to CFFN’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 17.7 hedge funds with bullish positions and the average amount invested in these stocks was $173 million. That figure was $81 million in CFFN’s case. Coherus Biosciences Inc (NASDAQ:CHRS) is the most popular stock in this table. On the other hand Piper Sandler Companies (NYSE:PIPR) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Capitol Federal Financial, Inc. (NASDAQ:CFFN) is even less popular than PIPR. Our overall hedge fund sentiment score for CFFN is 30.1. 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 CFFN 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 CFFN as the stock returned 36.2% since Q3 (through December 8th) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.