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Should You Avoid Catchmark Timber Trust Inc (CTT)?

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 Catchmark Timber Trust Inc (NYSE:CTT) and determine whether hedge funds skillfully traded this stock.

Catchmark Timber Trust Inc (NYSE:CTT) investors should pay attention to a decrease in hedge fund sentiment in recent months. Our calculations also showed that CTT 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.

In the financial world there are many methods stock market investors have at their disposal to analyze their stock investments. A duo of the most under-the-radar methods are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the top money managers can outpace the market by a healthy margin (see the details here).

Joe Huber - Huber Capital Management

Joe Huber of Huber Capital Management

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. With all of this in mind let’s take a peek at the fresh hedge fund action encompassing Catchmark Timber Trust Inc (NYSE:CTT).

Hedge fund activity in Catchmark Timber Trust Inc (NYSE:CTT)

At Q1’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -27% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in CTT a year ago. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Catchmark Timber Trust Inc (NYSE:CTT), which was worth $25.7 million at the end of the third quarter. On the second spot was Impax Asset Management which amassed $6.8 million worth of shares. Royce & Associates, Arrowstreet Capital, and Huber 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 Huber Capital Management allocated the biggest weight to Catchmark Timber Trust Inc (NYSE:CTT), around 0.3% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, dishing out 0.13 percent of its 13F equity portfolio to CTT.

Since Catchmark Timber Trust Inc (NYSE:CTT) has witnessed a decline in interest from hedge fund managers, logic holds that there exists a select few fund managers that decided to sell off their full holdings by the end of the first quarter. At the top of the heap, Israel Englander’s Millennium Management cut the largest position of all the hedgies watched by Insider Monkey, comprising about $5.2 million in stock. Mark Coe’s fund, Intrinsic Edge Capital, also dropped its stock, about $3.4 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 4 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Catchmark Timber Trust Inc (NYSE:CTT) but similarly valued. These stocks are Schnitzer Steel Industries, Inc. (NASDAQ:SCHN), Mirum Pharmaceuticals, Inc. (NASDAQ:MIRM), NeoPhotonics Corp (NYSE:NPTN), and Resources Connection, Inc. (NASDAQ:RECN). This group of stocks’ market valuations match CTT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SCHN 11 7324 1
MIRM 8 138087 1
NPTN 24 68849 5
RECN 10 39658 -2
Average 13.25 63480 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $41 million in CTT’s case. NeoPhotonics Corp (NYSE:NPTN) is the most popular stock in this table. On the other hand Mirum Pharmaceuticals, Inc. (NASDAQ:MIRM) is the least popular one with only 8 bullish hedge fund positions. Catchmark Timber Trust Inc (NYSE:CTT) is not the least popular stock in this group but hedge fund interest is still below average. 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on CTT, though not to the same extent, as the stock returned 24.6% during the second quarter and outperformed the market.

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