Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Collectors Universe, Inc. (NASDAQ:CLCT).
Is CLCT a good stock to buy now? Collectors Universe, Inc. (NASDAQ:CLCT) was in 11 hedge funds’ portfolios at the end of September. The all time high for this statistics is 10. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. CLCT investors should pay attention to an increase in activity from the world’s largest hedge funds of late. There were 9 hedge funds in our database with CLCT positions at the end of the second quarter. Our calculations also showed that CLCT 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. Now let’s take a look at the key hedge fund action surrounding Collectors Universe, Inc. (NASDAQ:CLCT).
Do Hedge Funds Think CLCT Is A Good Stock To Buy Now?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in CLCT over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Renaissance Technologies, holds the biggest position in Collectors Universe, Inc. (NASDAQ:CLCT). Renaissance Technologies has a $32.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Royce & Associates, managed by Chuck Royce, which holds a $12.7 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions consist of Scott Stewart Miller’s Greenhaven Road Investment Management, David Harding’s Winton Capital Management and Josh Goldberg’s G2 Investment Partners Management. In terms of the portfolio weights assigned to each position Greenhaven Road Investment Management allocated the biggest weight to Collectors Universe, Inc. (NASDAQ:CLCT), around 3.53% of its 13F portfolio. G2 Investment Partners Management is also relatively very bullish on the stock, earmarking 0.68 percent of its 13F equity portfolio to CLCT.
As one would reasonably expect, some big names have been driving this bullishness. Millennium Management, managed by Israel Englander, assembled the largest position in Collectors Universe, Inc. (NASDAQ:CLCT). Millennium Management had $1.2 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0.4 million position during the quarter. The only other fund with a new position in the stock is Roger Ibbotson’s Zebra Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Collectors Universe, Inc. (NASDAQ:CLCT) but similarly valued. These stocks are AngioDynamics, Inc. (NASDAQ:ANGO), Energy Recovery, Inc. (NASDAQ:ERII), Watford Holdings Ltd. (NASDAQ:WTRE), American Software, Inc. (NASDAQ:AMSWA), Inventiva S.A. (NASDAQ:IVA), Ennis, Inc. (NYSE:EBF), and Bank First Corporation (NASDAQ:BFC). This group of stocks’ market values are similar to CLCT’s market value.
|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 9.1 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $66 million in CLCT’s case. AngioDynamics, Inc. (NASDAQ:ANGO) is the most popular stock in this table. On the other hand Bank First Corporation (NASDAQ:BFC) is the least popular one with only 1 bullish hedge fund positions. Collectors Universe, Inc. (NASDAQ:CLCT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CLCT is 75.5. 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 CLCT as the stock returned 55.2% 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.