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Should You Buy Cathay General Bancorp (CATY)?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track more than 700 prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile gigantic failures like hedge funds’ recent losses in Valeant. Let’s take a closer look at what the funds we track think about Cathay General Bancorp (NASDAQ:CATY) in this article.

Cathay General Bancorp (NASDAQ:CATY)’s stock has advanced by 23% since the beginning of the year, but the stock still remains overlooked by most investors from our database. Nevertheless, during the third quarter, the number of funds with long positions went up to 12 from 11. 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 ALLETE Inc (NYSE:ALE), Ternium S.A. (ADR) (NYSE:TX), and Take-Two Interactive Software, Inc. (NASDAQ:TTWO) to gather more data points.

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If you’d ask most investors, hedge funds are assumed to be underperforming, old investment vehicles of years past. While there are greater than 8000 funds trading at the moment, Our experts choose to focus on the upper echelon of this group, approximately 700 funds. It is estimated that this group of investors manage the majority of the smart money’s total capital, and by keeping track of their inimitable stock picks, Insider Monkey has discovered numerous investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points per year for a decade in their back tests.

With all of this in mind, we’re going to take a glance at the latest action encompassing Cathay General Bancorp (NASDAQ:CATY).

How are hedge funds trading Cathay General Bancorp (NASDAQ:CATY)?

At the Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 9% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Columbus Circle Investors, managed by Clifford Fox, holds the largest position in Cathay General Bancorp (NASDAQ:CATY). Columbus Circle Investors has a $21.3 million position in the stock, comprising 0.2% of its 13F portfolio. On Columbus Circle Investors’s heels is Millennium Management, managed by Israel Englander, which holds a $12.4 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions include Jim Simons’s Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Cliff Asness’s AQR Capital Management.

Consequently, some big names were breaking ground themselves. Millennium Management assembled the biggest position in Cathay General Bancorp (NASDAQ:CATY). Arrowstreet Capital also initiated an $6.7 million position during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors, Ken Gray and Steve Walsh’s Bryn Mawr Capital, and Matthew Tewksbury’s Stevens Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Cathay General Bancorp (NASDAQ:CATY) but similarly valued. We will take a look at ALLETE Inc (NYSE:ALE), Ternium S.A. (ADR) (NYSE:TX), Take-Two Interactive Software, Inc. (NASDAQ:TTWO), and Cable One Inc (NYSE:CABO). This group of stocks’ market values are closest to CATY’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALE 11 42483 0
TX 13 27548 2
TTWO 35 905047 -5
CABO 25 274746 22

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $312 million. That figure was $65 million in CATY’s case. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is the most popular stock in this table. On the other hand ALLETE Inc (NYSE:ALE) is the least popular one with only 11 bullish hedge fund positions. Cathay General Bancorp (NASDAQ:CATY) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard TTWO might be a better candidate to consider a long position.

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