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Is Codorus Valley Bancorp, Inc. (CVLY) Going to Burn These Hedge Funds?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Codorus Valley Bancorp, Inc. (NASDAQ:CVLY).

Codorus Valley Bancorp, Inc. (NASDAQ:CVLY) investors should pay attention to a decrease in support from the world’s most elite money managers of late. CVLY was in 4 hedge funds’ portfolios at the end of the first quarter of 2020. There were 5 hedge funds in our database with CVLY positions at the end of the previous quarter. Our calculations also showed that CVLY isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 51 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Millennium Management, Catapult Capital Management

Israel Englander of Millennium Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s review the recent hedge fund action encompassing Codorus Valley Bancorp, Inc. (NASDAQ:CVLY).

What does smart money think about Codorus Valley Bancorp, Inc. (NASDAQ:CVLY)?

At Q1’s end, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the previous quarter. By comparison, 6 hedge funds held shares or bullish call options in CVLY a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Phil Stone’s Fourthstone LLC has the number one position in Codorus Valley Bancorp, Inc. (NASDAQ:CVLY), worth close to $5.3 million, comprising 4.8% of its total 13F portfolio. The second largest stake is Renaissance Technologies, with a $2.8 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish comprise Chuck Royce’s Royce & Associates, Israel Englander’s Millennium Management and . In terms of the portfolio weights assigned to each position Fourthstone LLC allocated the biggest weight to Codorus Valley Bancorp, Inc. (NASDAQ:CVLY), around 4.78% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to CVLY.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Endicott 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 CVLY as a viable investment and initiated a position in the stock.

Let’s check out hedge fund activity in other stocks similar to Codorus Valley Bancorp, Inc. (NASDAQ:CVLY). We will take a look at Auburn National Bancorporation, Inc. (NASDAQ:AUBN), Natural Resource Partners LP (NYSE:NRP), Avenue Therapeutics, Inc. (NASDAQ:ATXI), and Pulse Biosciences, Inc (NASDAQ:PLSE). This group of stocks’ market valuations are similar to CVLY’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AUBN 1 266 -1
NRP 4 7619 1
ATXI 3 10481 0
PLSE 2 197 1
Average 2.5 4641 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 2.5 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $10 million in CVLY’s case. Natural Resource Partners LP (NYSE:NRP) is the most popular stock in this table. On the other hand Auburn National Bancorporation, Inc. (NASDAQ:AUBN) is the least popular one with only 1 bullish hedge fund positions. Codorus Valley Bancorp, Inc. (NASDAQ:CVLY) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately CVLY wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CVLY were disappointed as the stock returned -16.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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Disclosure: None. This article was originally published at Insider Monkey.