The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Central Pacific Financial Corp. (NYSE:CPF).
Central Pacific Financial Corp. (NYSE:CPF) shareholders have witnessed a decrease in hedge fund sentiment lately. Our calculations also showed that CPF 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
David E. Shaw of D.E. Shaw
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 let’s go over the new hedge fund action regarding Central Pacific Financial Corp. (NYSE:CPF).
How are hedge funds trading Central Pacific Financial Corp. (NYSE:CPF)?
Heading into the second quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CPF over the last 18 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
The largest stake in Central Pacific Financial Corp. (NYSE:CPF) was held by Renaissance Technologies, which reported holding $20.9 million worth of stock at the end of September. It was followed by Millennium Management with a $5.4 million position. Other investors bullish on the company included D E Shaw, Prospector Partners, and AQR Capital Management. In terms of the portfolio weights assigned to each position Prospector Partners allocated the biggest weight to Central Pacific Financial Corp. (NYSE:CPF), around 0.71% of its 13F portfolio. Engineers Gate Manager is also relatively very bullish on the stock, dishing out 0.06 percent of its 13F equity portfolio to CPF.
Since Central Pacific Financial Corp. (NYSE:CPF) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of hedge funds that slashed their entire stakes heading into Q4. At the top of the heap, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors dumped the biggest stake of all the hedgies watched by Insider Monkey, comprising close to $0.6 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund dropped about $0.5 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 1 funds heading into Q4.
Let’s now review hedge fund activity in other stocks similar to Central Pacific Financial Corp. (NYSE:CPF). We will take a look at Kura Oncology, Inc. (NASDAQ:KURA), Brinker International, Inc. (NYSE:EAT), Apollo Investment Corp. (NASDAQ:AINV), and Golden Ocean Group Ltd (NASDAQ:GOGL). This group of stocks’ market valuations are similar to CPF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KURA | 23 | 121653 | 1 |
| EAT | 16 | 47292 | -5 |
| AINV | 10 | 19432 | 1 |
| GOGL | 8 | 140504 | -1 |
| Average | 14.25 | 82220 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $82 million. That figure was $47 million in CPF’s case. Kura Oncology, Inc. (NASDAQ:KURA) is the most popular stock in this table. On the other hand Golden Ocean Group Ltd (NASDAQ:GOGL) is the least popular one with only 8 bullish hedge fund positions. Central Pacific Financial Corp. (NYSE:CPF) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 but beat the market by 16.8 percentage points. Unfortunately CPF wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CPF were disappointed as the stock returned -2.3% during the same time period 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 many of these stocks already outperformed the market so far this year.
Follow Central Pacific Financial Corp (NYSE:CPF)
Follow Central Pacific Financial Corp (NYSE:CPF)
Disclosure: None. This article was originally published at Insider Monkey.
