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Should You Avoid Columbus McKinnon Corporation (CMCO)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Columbus McKinnon Corporation (NASDAQ:CMCO) based on that data.

Columbus McKinnon Corporation (NASDAQ:CMCO) has experienced a decrease in hedge fund interest lately. Our calculations also showed that CMCO 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Keeping this in mind we’re going to analyze the recent hedge fund action regarding Columbus McKinnon Corporation (NASDAQ:CMCO).

How are hedge funds trading Columbus McKinnon Corporation (NASDAQ:CMCO)?

At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from the fourth quarter of 2019. By comparison, 21 hedge funds held shares or bullish call options in CMCO a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Columbus McKinnon Corporation (NASDAQ:CMCO) was held by Renaissance Technologies, which reported holding $7.2 million worth of stock at the end of September. It was followed by Marshall Wace LLP with a $3.2 million position. Other investors bullish on the company included Divisar Capital, Skylands Capital, and Forest Hill Capital. In terms of the portfolio weights assigned to each position Forest Hill Capital allocated the biggest weight to Columbus McKinnon Corporation (NASDAQ:CMCO), around 1.33% of its 13F portfolio. Divisar Capital is also relatively very bullish on the stock, dishing out 1.18 percent of its 13F equity portfolio to CMCO.

Because Columbus McKinnon Corporation (NASDAQ:CMCO) has experienced declining sentiment from the smart money, it’s safe to say that there is a sect of fund managers that slashed their positions entirely heading into Q4. At the top of the heap, Richard Driehaus’s Driehaus Capital dumped the biggest stake of the 750 funds watched by Insider Monkey, valued at about $9.2 million in stock, and Ira Unschuld’s Brant Point Investment Management was right behind this move, as the fund dropped about $3 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 3 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Columbus McKinnon Corporation (NASDAQ:CMCO) but similarly valued. These stocks are Accel Entertainment, Inc. (NYSE:ACEL), Changyou.Com Ltd (NASDAQ:CYOU), Universal Insurance Holdings, Inc. (NYSE:UVE), and Virtus Investment Partners Inc (NASDAQ:VRTS). This group of stocks’ market values are similar to CMCO’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ACEL 18 69509 3
CYOU 10 72996 -3
UVE 11 35019 -2
VRTS 12 40961 -2
Average 12.75 54621 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $28 million in CMCO’s case. Accel Entertainment, Inc. (NYSE:ACEL) is the most popular stock in this table. On the other hand Changyou.Com Ltd (NASDAQ:CYOU) is the least popular one with only 10 bullish hedge fund positions. Columbus McKinnon Corporation (NASDAQ:CMCO) is not the most popular stock in this group but hedge fund interest is still above 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 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on CMCO, though not to the same extent, as the stock returned 23.7% during the first two months and twenty five days of the second quarter and outperformed the market as well.

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