Is Cambridge Bancorp (NASDAQ:CATC) a good bet right now? We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Cambridge Bancorp (NASDAQ:CATC) a bargain? The smart money is selling. The number of long hedge fund positions shrunk by 1 recently. Our calculations also showed that CATC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). CATC was in 4 hedge funds’ portfolios at the end of September. There were 5 hedge funds in our database with CATC positions at the end of the previous quarter.
Video: Click the image to 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 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Mario Gabelli of GAMCO Investors
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s view the key hedge fund action encompassing Cambridge Bancorp (NASDAQ:CATC).
How are hedge funds trading Cambridge Bancorp (NASDAQ:CATC)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CATC over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Castine Capital Management, managed by Paul Magidson, Jonathan Cohen. And Ostrom Enders, holds the largest position in Cambridge Bancorp (NASDAQ:CATC). Castine Capital Management has a $9.5 million position in the stock, comprising 2.6% of its 13F portfolio. Coming in second is Polaris Capital Management, managed by Bernard Horn, which holds a $4.2 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish include Renaissance Technologies, Mario Gabelli’s GAMCO Investors and . In terms of the portfolio weights assigned to each position Castine Capital Management allocated the biggest weight to Cambridge Bancorp (NASDAQ:CATC), around 2.59% of its 13F portfolio. Polaris Capital Management is also relatively very bullish on the stock, setting aside 0.19 percent of its 13F equity portfolio to CATC.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Springbok Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified CATC as a viable investment and initiated a position in the stock.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Cambridge Bancorp (NASDAQ:CATC) but similarly valued. These stocks are Dynex Capital Inc (NYSE:DX), Carriage Services, Inc. (NYSE:CSV), Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX), and Petmed Express Inc (NASDAQ:PETS). All of these stocks’ market caps resemble CATC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DX | 7 | 15250 | 1 |
| CSV | 9 | 42949 | 0 |
| CRNX | 11 | 159722 | 1 |
| PETS | 13 | 66497 | -4 |
| Average | 10 | 71105 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $15 million in CATC’s case. Petmed Express Inc (NASDAQ:PETS) is the most popular stock in this table. On the other hand Dynex Capital Inc (NYSE:DX) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Cambridge Bancorp (NASDAQ:CATC) is even less popular than DX. Hedge funds dodged a bullet by taking a bearish stance towards CATC. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CATC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CATC investors were disappointed as the stock returned 4.5% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
