We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Civista Bancshares, Inc. (NASDAQ:CIVB).
Is CIVB a good stock to buy now? Prominent investors were becoming less hopeful. The number of long hedge fund bets retreated by 1 in recent months. Civista Bancshares, Inc. (NASDAQ:CIVB) was in 11 hedge funds’ portfolios at the end of September. The all time high for this statistics is 12. Our calculations also showed that CIVB 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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 check out the latest hedge fund action surrounding Civista Bancshares, Inc. (NASDAQ:CIVB).
Do Hedge Funds Think CIVB Is A Good Stock To Buy Now?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards CIVB over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Civista Bancshares, Inc. (NASDAQ:CIVB) was held by Renaissance Technologies, which reported holding $2.8 million worth of stock at the end of September. It was followed by Mendon Capital Advisors with a $1.8 million position. Other investors bullish on the company included Arrowstreet Capital, Winton Capital Management, and Millennium Management. In terms of the portfolio weights assigned to each position Mendon Capital Advisors allocated the biggest weight to Civista Bancshares, Inc. (NASDAQ:CIVB), around 1.02% of its 13F portfolio. Seidman Investment Partnership is also relatively very bullish on the stock, designating 0.24 percent of its 13F equity portfolio to CIVB.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Castine Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified CIVB as a viable investment and initiated a position in the stock.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Civista Bancshares, Inc. (NASDAQ:CIVB) but similarly valued. We will take a look at Alpha Pro Tech, Ltd. (NYSE:APT), AquaBounty Technologies, Inc. (NASDAQ:AQB), ESSA Pharma Inc. (NASDAQ:EPIX), Verrica Pharmaceuticals Inc. (NASDAQ:VRCA), Soleno Therapeutics, Inc. (NASDAQ:SLNO), Hovnanian Enterprises, Inc. (NYSE:HOV), and Medicenna Therapeutics Corp. (NASDAQ:MDNA). This group of stocks’ market values resemble CIVB’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 7.6 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $7 million in CIVB’s case. ESSA Pharma Inc. (NASDAQ:EPIX) is the most popular stock in this table. On the other hand Medicenna Therapeutics Corp. (NASDAQ:MDNA) is the least popular one with only 2 bullish hedge fund positions. Civista Bancshares, Inc. (NASDAQ:CIVB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CIVB is 63.6. 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. 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. Hedge funds were also right about betting on CIVB as the stock returned 39.7% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.