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Is Colony Capital Inc (CLNY) A Good Stock To Buy ?

At Insider Monkey we follow nearly 750 of the best-performing investors and even though many of them lost money in the last couple of months of 2018 (some actually delivered very strong returns), the history teaches us that over the long-run they still manage to beat the market, which is why it can be profitable for us to imitate their activity. Of course, even the best money managers can sometimes get it wrong, but following some of their picks gives us a better chance to outperform the crowd than picking a random stock and this is where our research comes in.

Colony Capital Inc (NYSE:CLNY) shareholders have witnessed a decrease in support from the world’s most elite money managers in recent months. Our calculations also showed that clny isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

BAUPOST GROUP Seth Klarman

We’re going to check out the new hedge fund action encompassing Colony Capital Inc (NYSE:CLNY).

Hedge fund activity in Colony Capital Inc (NYSE:CLNY)

At Q1’s end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CLNY over the last 15 quarters. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

No of Hedge Funds with CLNY Positions

The largest stake in Colony Capital Inc (NYSE:CLNY) was held by Baupost Group, which reported holding $264.3 million worth of stock at the end of March. It was followed by Odey Asset Management Group with a $41.6 million position. Other investors bullish on the company included Tensile Capital, Renaissance Technologies, and HBK Investments.

Since Colony Capital Inc (NYSE:CLNY) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there were a few funds who sold off their positions entirely in the third quarter. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the largest investment of all the hedgies monitored by Insider Monkey, worth close to $2.9 million in stock. Jeffrey Hinkle’s fund, Shoals Capital Management, also dumped its stock, about $2.6 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 3 funds in the third quarter.

Let’s now review hedge fund activity in other stocks similar to Colony Capital Inc (NYSE:CLNY). These stocks are Ligand Pharmaceuticals Inc. (NASDAQ:LGND), Belmond Ltd (NYSE:BEL), PotlatchDeltic Corporation (NASDAQ:PCH), and Globant SA (NYSE:GLOB). All of these stocks’ market caps resemble CLNY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LGND 23 445210 -1
BEL 16 347519 -4
PCH 17 336121 2
GLOB 20 65839 5
Average 19 298672 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $299 million. That figure was $381 million in CLNY’s case. Ligand Pharmaceuticals Inc. (NASDAQ:LGND) is the most popular stock in this table. On the other hand Belmond Ltd (NYSE:BEL) is the least popular one with only 16 bullish hedge fund positions. Colony Capital Inc (NYSE:CLNY) 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 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately CLNY wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CLNY were disappointed as the stock returned -4.3% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

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

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