Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Columbia Sportswear Company (NASDAQ:COLM).
Is COLM a good stock to buy now? Columbia Sportswear Company (NASDAQ:COLM) investors should be aware of an increase in enthusiasm from smart money lately. Columbia Sportswear Company (NASDAQ:COLM) was in 19 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 32. Our calculations also showed that COLM 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.
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 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. 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.
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 take a look at the latest hedge fund action encompassing Columbia Sportswear Company (NASDAQ:COLM).
Do Hedge Funds Think COLM Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards COLM 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.
More specifically, Broad Bay Capital was the largest shareholder of Columbia Sportswear Company (NASDAQ:COLM), with a stake worth $11.3 million reported as of the end of September. Trailing Broad Bay Capital was AQR Capital Management, which amassed a stake valued at $7.5 million. Millennium Management, Running Oak Capital, and Winton Capital 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 Running Oak Capital allocated the biggest weight to Columbia Sportswear Company (NASDAQ:COLM), around 1.81% of its 13F portfolio. Broad Bay Capital is also relatively very bullish on the stock, earmarking 1.65 percent of its 13F equity portfolio to COLM.
As industrywide interest jumped, some big names have jumped into Columbia Sportswear Company (NASDAQ:COLM) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most outsized position in Columbia Sportswear Company (NASDAQ:COLM). Arrowstreet Capital had $4.1 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $1.3 million position during the quarter. The following funds were also among the new COLM investors: David Andre and Astro Teller’s Cerebellum Capital and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now review hedge fund activity in other stocks similar to Columbia Sportswear Company (NASDAQ:COLM). These stocks are Cemex SAB de CV (NYSE:CX), FirstService Corporation (NASDAQ:FSV), BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ), InVitae Corporation (NYSE:NVTA), Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI), Huntington Ingalls Industries Inc (NYSE:HII), and Vertiv Holdings Co (NYSE:VRT). All of these stocks’ market caps are closest to COLM’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 28.1 hedge funds with bullish positions and the average amount invested in these stocks was $500 million. That figure was $49 million in COLM’s case. Vertiv Holdings Co (NYSE:VRT) is the most popular stock in this table. On the other hand FirstService Corporation (NASDAQ:FSV) is the least popular one with only 12 bullish hedge fund positions. Columbia Sportswear Company (NASDAQ:COLM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for COLM is 33.8. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately COLM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); COLM investors were disappointed as the stock returned -3.8% since the end of September (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.