Should You Avoid Columbus McKinnon Corp. (CMCO)?

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

In this article, we’ll take a closer look at Columbus McKinnon Corp. (NASDAQ:CMCO), which lost some appeal among smart money investors last quarter. There were 14 funds in our database bullish on the company at the end of September. However, the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as CNX Coal Resources LP (NYSE:CNXC), Triumph Bancorp Inc (NASDAQ:TBK), and Peoples Utah Bancorp (NASDAQ:PUB) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

With all of this in mind, we’re going to take a glance at the key action regarding Columbus McKinnon Corp. (NASDAQ:CMCO).

What have hedge funds been doing with Columbus McKinnon Corp. (NASDAQ:CMCO)?

At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in Columbus McKinnon, compared to 15 investors a quarter earlier. By comparison, 10 hedge funds held shares or bullish call options in CMCO heading into this year. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Richard S. Pzena’s Pzena Investment Management holds the biggest position in Columbus McKinnon Corp. (NASDAQ:CMCO). Pzena Investment Management has a $27.5 million position in the stock, comprising 0.2% of its 13F portfolio. On Pzena Investment Management’s heels is Rutabaga Capital Management, led by Peter Schliemann, holding a $9.6 million position; the fund has 1.9% of its 13F portfolio invested in the stock. Some other peers that hold long positions comprise Julian Allen’s Spitfire Capital, Chuck Royce’s Royce & Associates, and Mark Lee’s Forest Hill Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

We already know that not all hedge funds are bullish on the stock and some hedge funds actually said goodbye to their positions entirely. Intriguingly, Douglas Dethy’s DC Capital Partners said goodbye to the largest stake of the 700 funds watched by Insider Monkey, worth an estimated $0.7 million in stock, and Neil Chriss’ Hutchin Hill Capital was right behind this move, as the fund dumped about $0.2 million worth of shares.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Columbus McKinnon Corp. (NASDAQ:CMCO) but similarly valued. These stocks are CNX Coal Resources LP (NYSE:CNXC), Triumph Bancorp Inc (NASDAQ:TBK), Peoples Utah Bancorp (NASDAQ:PUB), and Calix Inc (NYSE:CALX). This group of stocks’ market values are closest to CMCO’s market value.

As you can see these stocks had an average of eight funds with bullish positions and the average amount invested in these stocks was $51 million. That figure was $65 million in CMCO’s case. Calix Inc (NYSE:CALX) is the most popular stock in this table, while Peoples Utah Bancorp (NASDAQ:PUB) is the least popular one with only four funds having reported long positions. Compared to these stocks Columbus McKinnon Corp. (NASDAQ:CMCO) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: none