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. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Chimera Investment Corporation (NYSE:CIM) and determine whether the smart money was really smart about this stock.
Chimera Investment Corporation (NYSE:CIM) has seen an increase in activity from the world’s largest hedge funds in recent months. CIM was in 17 hedge funds’ portfolios at the end of the first quarter of 2020. There were 14 hedge funds in our database with CIM holdings at the end of the previous quarter. Our calculations also showed that CIM 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.
Leon Cooperman of Omega Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let’s take a gander at the latest hedge fund action encompassing Chimera Investment Corporation (NYSE:CIM).
Hedge fund activity in Chimera Investment Corporation (NYSE:CIM)
At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CIM over the last 18 quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
More specifically, Omega Advisors was the largest shareholder of Chimera Investment Corporation (NYSE:CIM), with a stake worth $30.9 million reported as of the end of September. Trailing Omega Advisors was HBK Investments, which amassed a stake valued at $4.9 million. Winton Capital Management, Arrowstreet Capital, and Driehaus 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 Omega Advisors allocated the biggest weight to Chimera Investment Corporation (NYSE:CIM), around 3.99% of its 13F portfolio. Ellington is also relatively very bullish on the stock, dishing out 0.17 percent of its 13F equity portfolio to CIM.
Consequently, key hedge funds were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the largest position in Chimera Investment Corporation (NYSE:CIM). Arrowstreet Capital had $3.6 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also made a $1.7 million investment in the stock during the quarter. The following funds were also among the new CIM investors: John Overdeck and David Siegel’s Two Sigma Advisors, Mike Vranos’s Ellington, and Donald Sussman’s Paloma Partners.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Chimera Investment Corporation (NYSE:CIM) but similarly valued. We will take a look at Summit Materials Inc (NYSE:SUM), Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA), Tower Semiconductor Ltd. (NASDAQ:TSEM), and Xencor Inc (NASDAQ:XNCR). This group of stocks’ market valuations are closest to CIM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SUM | 27 | 248345 | -8 |
| IBA | 3 | 28755 | 0 |
| TSEM | 11 | 272127 | -5 |
| XNCR | 13 | 162286 | -3 |
| Average | 13.5 | 177878 | -4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $178 million. That figure was $49 million in CIM’s case. Summit Materials Inc (NYSE:SUM) is the most popular stock in this table. On the other hand Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA) is the least popular one with only 3 bullish hedge fund positions. Chimera Investment Corporation (NYSE:CIM) 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 18.6% in 2020 through July 27th but beat the market by 17.1 percentage points. Unfortunately CIM wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CIM were disappointed as the stock returned 0.8% 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 Chimera Investment Corp (NYSE:CIM)
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Disclosure: None. This article was originally published at Insider Monkey.
