It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during October and average hedge fund losing about 3%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 4 percentage points during the first half of Q4, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Central Pacific Financial Corp. (NYSE:CPF) during the quarter below.
Is Central Pacific Financial Corp. (NYSE:CPF) a buy, sell, or hold? The smart money is becoming less confident. The number of long hedge fund positions retreated by 4 recently. Our calculations also showed that CPF isn’t among the 30 most popular stocks among hedge funds. CPF was in 12 hedge funds’ portfolios at the end of September. There were 16 hedge funds in our database with CPF holdings at the end of the previous quarter.
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’ 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 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to view the fresh hedge fund action regarding Central Pacific Financial Corp. (NYSE:CPF).
Hedge fund activity in Central Pacific Financial Corp. (NYSE:CPF)
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the second quarter of 2018. On the other hand, there were a total of 13 hedge funds with a bullish position in CPF at the beginning of this year. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in Central Pacific Financial Corp. (NYSE:CPF) was held by GLG Partners, which reported holding $19.7 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $16.5 million position. Other investors bullish on the company included Prospector Partners, AQR Capital Management, and Millennium Management.
Seeing as Central Pacific Financial Corp. (NYSE:CPF) has faced a decline in interest from the smart money, it’s safe to say that there exists a select few fund managers who were dropping their entire stakes by the end of the third quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management said goodbye to the largest investment of the 700 funds tracked by Insider Monkey, worth close to $1.2 million in stock, and Thomas Bailard’s Bailard Inc was right behind this move, as the fund dropped about $0.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 4 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks similar to Central Pacific Financial Corp. (NYSE:CPF). We will take a look at Dynavax Technologies Corporation (NASDAQ:DVAX), Univest Corp. of PA (NASDAQ:UVSP), ObsEva SA (NASDAQ:OBSV), and Invesco Senior Income Trust (NYSE:VVR). This group of stocks’ market valuations match CPF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DVAX | 19 | 151557 | -1 |
| UVSP | 7 | 32705 | 1 |
| OBSV | 13 | 100755 | 1 |
| VVR | 7 | 25926 | 2 |
| Average | 11.5 | 77736 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $80 million in CPF’s case. Dynavax Technologies Corporation (NASDAQ:DVAX) is the most popular stock in this table. On the other hand Univest Corp. of PA (NASDAQ:UVSP) is the least popular one with only 7 bullish hedge fund positions. Central Pacific Financial Corp. (NYSE:CPF) 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. In this regard DVAX might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
