In this article we will take a look at whether hedge funds think Cathay General Bancorp (NASDAQ:CATY) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Cathay General Bancorp (NASDAQ:CATY) a healthy stock for your portfolio? Hedge funds are becoming more confident. The number of bullish hedge fund positions improved by 1 lately. Our calculations also showed that CATY 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). CATY was in 15 hedge funds’ portfolios at the end of March. There were 14 hedge funds in our database with CATY holdings at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most investors, hedge funds are perceived as worthless, outdated investment vehicles of the past. While there are greater than 8000 funds trading at the moment, Our experts choose to focus on the moguls of this club, around 850 funds. These hedge fund managers direct the majority of the hedge fund industry’s total asset base, and by keeping track of their unrivaled picks, Insider Monkey has determined a number of investment strategies that have historically outstripped the broader indices. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Israel Englander of Millennium Management
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 take a look at the latest hedge fund action surrounding Cathay General Bancorp (NASDAQ:CATY).
What does smart money think about Cathay General Bancorp (NASDAQ:CATY)?
At Q1’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in CATY over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Adage Capital Management held the most valuable stake in Cathay General Bancorp (NASDAQ:CATY), which was worth $4.7 million at the end of the third quarter. On the second spot was Millennium Management which amassed $4.2 million worth of shares. Renaissance Technologies, AQR Capital Management, and Arrowstreet Capital 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 AlphaCrest Capital Management allocated the biggest weight to Cathay General Bancorp (NASDAQ:CATY), around 0.1% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, dishing out 0.04 percent of its 13F equity portfolio to CATY.
As industrywide interest jumped, key money managers have been driving this bullishness. Renaissance Technologies, initiated the most outsized position in Cathay General Bancorp (NASDAQ:CATY). Renaissance Technologies had $3.5 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $1.5 million position during the quarter. The following funds were also among the new CATY investors: Paul Tudor Jones’s Tudor Investment Corp, D. E. Shaw’s D E Shaw, and Greg Eisner’s Engineers Gate Manager.
Let’s now take a look at hedge fund activity in other stocks similar to Cathay General Bancorp (NASDAQ:CATY). We will take a look at AllianceBernstein Holding LP (NYSE:AB), Fastly, Inc. (NYSE:FSLY), Companhia Siderurgica Nacional (NYSE:SID), and Univar Solutions Inc (NYSE:UNVR). This group of stocks’ market valuations resemble CATY’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AB | 7 | 19810 | -4 |
| FSLY | 22 | 276560 | 3 |
| SID | 5 | 3203 | -1 |
| UNVR | 32 | 686782 | -11 |
| Average | 16.5 | 246589 | -3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $247 million. That figure was $22 million in CATY’s case. Univar Solutions Inc (NYSE:UNVR) is the most popular stock in this table. On the other hand Companhia Siderurgica Nacional (NYSE:SID) is the least popular one with only 5 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. 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 and surpassed the market by 16.8 percentage points. Unfortunately CATY wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CATY investors were disappointed as the stock returned 13% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Follow Cathay General Bancorp (NASDAQ:CATY)
Follow Cathay General Bancorp (NASDAQ:CATY)
Disclosure: None. This article was originally published at Insider Monkey.
