We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Comerica Incorporated (NYSE:CMA) and determine whether hedge funds skillfully traded this stock.
Is Comerica Incorporated (NYSE:CMA) ready to rally soon? Hedge funds were turning bullish. The number of long hedge fund bets went up by 3 in recent months. Comerica Incorporated (NYSE:CMA) was in 36 hedge funds’ portfolios at the end of June. The all time high for this statistics is 49. Our calculations also showed that CMA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 33 hedge funds in our database with CMA positions at the end of the first quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
To most traders, hedge funds are viewed as underperforming, outdated investment tools of the past. While there are more than 8000 funds in operation at present, We hone in on the upper echelon of this group, about 850 funds. It is estimated that this group of investors orchestrate most of all hedge funds’ total capital, and by watching their unrivaled picks, Insider Monkey has determined many investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
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 precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are also checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. Keeping this in mind let’s take a look at the latest hedge fund action encompassing Comerica Incorporated (NYSE:CMA).
Hedge fund activity in Comerica Incorporated (NYSE:CMA)
At second quarter’s end, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the previous quarter. By comparison, 32 hedge funds held shares or bullish call options in CMA 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.
The largest stake in Comerica Incorporated (NYSE:CMA) was held by Citadel Investment Group, which reported holding $55.6 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $53.7 million position. Other investors bullish on the company included Two Sigma Advisors, D E Shaw, and Adage Capital Management. In terms of the portfolio weights assigned to each position MSDC Management allocated the biggest weight to Comerica Incorporated (NYSE:CMA), around 5.92% of its 13F portfolio. Elizabeth Park Capital Management is also relatively very bullish on the stock, earmarking 2.41 percent of its 13F equity portfolio to CMA.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Azora Capital, managed by Ravi Chopra, assembled the biggest position in Comerica Incorporated (NYSE:CMA). Azora Capital had $13.3 million invested in the company at the end of the quarter. Jeffrey Altman’s Owl Creek Asset Management also made a $12.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Fred Cummings’s Elizabeth Park Capital Management, and Minhua Zhang’s Weld Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Comerica Incorporated (NYSE:CMA) but similarly valued. These stocks are PLDT Inc. (NYSE:PHI), Ralph Lauren Corporation (NYSE:RL), Ares Management Corp (NYSE:ARES), Churchill Downs Incorporated (NASDAQ:CHDN), Sonoco Products Company (NYSE:SON), First Solar, Inc. (NASDAQ:FSLR), and Reata Pharmaceuticals, Inc. (NASDAQ:RETA). This group of stocks’ market values resemble CMA’s market value.
|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 21.4 hedge funds with bullish positions and the average amount invested in these stocks was $306 million. That figure was $424 million in CMA’s case. Reata Pharmaceuticals, Inc. (NASDAQ:RETA) is the most popular stock in this table. On the other hand PLDT Inc. (NYSE:PHI) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Comerica Incorporated (NYSE:CMA) is more popular among hedge funds. Our overall hedge fund sentiment score for CMA is 80. 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 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately CMA wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CMA were disappointed as the stock returned 3.8% since the end of 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 in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.