Were Hedge Funds Right About Community Bank System, Inc. (CBU) ?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on Community Bank System, Inc. (NYSE:CBU).

Is Community Bank System, Inc. (NYSE:CBU) a sound investment now? The best stock pickers are taking a pessimistic view. The number of long hedge fund bets shrunk by 5 in recent months. Our calculations also showed that CBU isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

Today there are a multitude of gauges shareholders employ to value their holdings. A pair of the most under-the-radar gauges are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the elite money managers can outpace the market by a healthy margin (see the details here).

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

With all of this in mind let’s take a gander at the recent hedge fund action regarding Community Bank System, Inc. (NYSE:CBU).

Hedge fund activity in Community Bank System, Inc. (NYSE:CBU)

At the end of the fourth quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the previous quarter. On the other hand, there were a total of 11 hedge funds with a bullish position in CBU a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Among these funds, Millennium Management held the most valuable stake in Community Bank System, Inc. (NYSE:CBU), which was worth $5.4 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $3.4 million worth of shares. Balyasny Asset Management, Holocene Advisors, and Paloma Partners 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 Minerva Advisors allocated the biggest weight to Community Bank System, Inc. (NYSE:CBU), around 0.53% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, dishing out 0.03 percent of its 13F equity portfolio to CBU.

Due to the fact that Community Bank System, Inc. (NYSE:CBU) has experienced a decline in interest from the smart money, it’s easy to see that there exists a select few funds who were dropping their full holdings by the end of the third quarter. It’s worth mentioning that Noam Gottesman’s GLG Partners dumped the largest stake of the “upper crust” of funds monitored by Insider Monkey, valued at about $3.5 million in stock, and Renaissance Technologies was right behind this move, as the fund said goodbye to about $0.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Community Bank System, Inc. (NYSE:CBU). These stocks are Ingevity Corporation (NYSE:NGVT), Envestnet Inc (NYSE:ENV), LivaNova PLC (NASDAQ:LIVN), and Nevro Corp (NYSE:NVRO). This group of stocks’ market caps are similar to CBU’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NGVT 27 158927 1
ENV 18 86201 3
LIVN 22 195956 5
NVRO 33 961499 11
Average 25 350646 5

View table here if you experience formatting issues.

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $351 million. That figure was $18 million in CBU’s case. Nevro Corp (NYSE:NVRO) is the most popular stock in this table. On the other hand Envestnet Inc (NYSE:ENV) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Community Bank System, Inc. (NYSE:CBU) is even less popular than ENV. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. A small number of hedge funds were also right about betting on CBU, though not to the same extent, as the stock returned -14.1% during the same time period and outperformed the market as well.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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