We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article, we look at what those funds think of Customers Bancorp Inc (NYSE:CUBI) based on that data.
Is CUBI a good stock to buy now? The smart money was taking a bearish view. The number of bullish hedge fund positions decreased by 5 in recent months. Customers Bancorp Inc (NYSE:CUBI) was in 10 hedge funds’ portfolios at the end of September. The all time high for this statistics is 16. Our calculations also showed that CUBI 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). There were 15 hedge funds in our database with CUBI holdings at the end of June.
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. Now let’s view the new hedge fund action regarding Customers Bancorp Inc (NYSE:CUBI).
Do Hedge Funds Think CUBI Is A Good Stock To Buy Now?
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CUBI over the last 21 quarters. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in Customers Bancorp Inc (NYSE:CUBI) was held by Newtyn Management, which reported holding $8.4 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $2.2 million position. Other investors bullish on the company included AQR Capital Management, Citadel Investment Group, and Algert Coldiron Investors. In terms of the portfolio weights assigned to each position Newtyn Management allocated the biggest weight to Customers Bancorp Inc (NYSE:CUBI), around 2.04% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, earmarking 0.12 percent of its 13F equity portfolio to CUBI.
Because Customers Bancorp Inc (NYSE:CUBI) has witnessed falling interest from hedge fund managers, it’s safe to say that there were a few fund managers who sold off their entire stakes by the end of the third quarter. At the top of the heap, Matthew Lindenbaum’s Basswood Capital dumped the largest investment of the 750 funds tracked by Insider Monkey, comprising about $1.9 million in stock. Noam Gottesman’s fund, GLG Partners, also cut its stock, about $1.8 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Customers Bancorp Inc (NYSE:CUBI) but similarly valued. These stocks are IMARA Inc. (NASDAQ:IMRA), Alliance Resource Partners, L.P. (NASDAQ:ARLP), Dynex Capital Inc (NYSE:DX), MRC Global Inc (NYSE:MRC), MEI Pharma Inc (NASDAQ:MEIP), AC Immune SA (NASDAQ:ACIU), and MBIA Inc. (NYSE:MBI). All of these stocks’ market caps match CUBI’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 11.1 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $13 million in CUBI’s case. MRC Global Inc (NYSE:MRC) is the most popular stock in this table. On the other hand Alliance Resource Partners, L.P. (NASDAQ:ARLP) is the least popular one with only 4 bullish hedge fund positions. Customers Bancorp Inc (NYSE:CUBI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CUBI is 40.2. 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. A small number of hedge funds were also right about betting on CUBI as the stock returned 68.2% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.