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Is Columbia Financial, Inc. (CLBK) Going to Burn These Hedge Funds?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Columbia Financial, Inc. (NASDAQ:CLBK) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Columbia Financial, Inc. (NASDAQ:CLBK) has seen a decrease in enthusiasm from smart money recently. Our calculations also showed that CLBK 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.

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 58 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.

Fred DiSanto Ancora Advisors

Fred DiSanto of Ancora Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the recent hedge fund action regarding Columbia Financial, Inc. (NASDAQ:CLBK).

What have hedge funds been doing with Columbia Financial, Inc. (NASDAQ:CLBK)?

Heading into the second quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in CLBK a year ago. So, let’s examine 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 number one position in Columbia Financial, Inc. (NASDAQ:CLBK). Renaissance Technologies has a $14.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Ancora Advisors, led by Frederick DiSanto, holding a $8.8 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other peers that are bullish include Lawrence Seidman’s Seidman Investment Partnership, Michael Price’s MFP Investors and David Harding’s Winton Capital Management. In terms of the portfolio weights assigned to each position Seidman Investment Partnership allocated the biggest weight to Columbia Financial, Inc. (NASDAQ:CLBK), around 9.62% of its 13F portfolio. MFP Investors is also relatively very bullish on the stock, setting aside 1.06 percent of its 13F equity portfolio to CLBK.

Since Columbia Financial, Inc. (NASDAQ:CLBK) has witnessed a decline in interest from the entirety of the hedge funds we track, we can see that there were a few fund managers that elected to cut their full holdings last quarter. At the top of the heap, Israel Englander’s Millennium Management said goodbye to the biggest position of the 750 funds watched by Insider Monkey, valued at close to $0.3 million in stock. Matthew Lindenbaum’s fund, Basswood Capital, also dropped its stock, about $0 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Columbia Financial, Inc. (NASDAQ:CLBK) but similarly valued. These stocks are SPS Commerce, Inc. (NASDAQ:SPSC), Targa Resources Corp (NYSE:TRGP), LATAM Airlines Group S.A. (NYSE:LTM), and Capri Holdings Limited (NYSE:CPRI). All of these stocks’ market caps are closest to CLBK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SPSC 16 137949 -8
TRGP 29 104380 2
LTM 10 8139 -4
CPRI 29 280046 -11
Average 21 132629 -5.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $133 million. That figure was $42 million in CLBK’s case. Targa Resources Corp (NYSE:TRGP) is the most popular stock in this table. On the other hand LATAM Airlines Group S.A. (NYSE:LTM) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Columbia Financial, Inc. (NASDAQ:CLBK) is even less popular than LTM. Hedge funds dodged a bullet by taking a bearish stance towards CLBK. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but managed to beat the market by 15.5 percentage points. Unfortunately CLBK wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); CLBK investors were disappointed as the stock returned -3.1% during the second quarter 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 most of these stocks already outperformed the market so far in 2020.

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