Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
City Holding Company (NASDAQ:CHCO) was in 11 hedge funds’ portfolios at the end of the third quarter of 2016. CHCO has experienced an increase in support from the world’s most successful money managers of late. There were 9 hedge funds in our database with CHCO holdings at the end of the previous quarter. At the end of this article we will also compare CHCO to other stocks including Gray Television, Inc. (NYSE:GTN), Nimble Storage Inc (NYSE:NMBL), and Altra Holdings, Inc. (NASDAQ:AIMC) to get a better sense of its popularity.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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With all of this in mind, we’re going to check out the fresh action regarding City Holding Company (NASDAQ:CHCO).
How are hedge funds trading City Holding Company (NASDAQ:CHCO)?
Heading into the fourth quarter of 2016, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CHCO over the last 5 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s elite fund database, Royce & Associates, led by Chuck Royce, holds the number one position in City Holding Company (NASDAQ:CHCO). Royce & Associates has a $30.6 million position in the stock, comprising 0.2% of its 13F portfolio. The second most bullish fund manager is Renaissance Technologies, one of the largest hedge funds in the world, led by Jim Simons, holding a $4.8 million position; less than 0.1% of its 13F portfolio is allocated to the company. Remaining peers with similar optimism consist of John Overdeck and David Siegel’s Two Sigma Advisors, and Cliff Asness’s AQR Capital Management We should note that none of these elite funds are among our list of the 100 best performing elite funds which is based on the performance of their 13F long positions in non-microcap stocks.
As industrywide interest jumped, specific money managers have jumped into City Holding Company (NASDAQ:CHCO) headfirst. Citadel Investment Group, led by Ken Griffin, created the most outsized position in City Holding Company (NASDAQ:CHCO). Citadel Investment Group had $1.2 million invested in the company at the end of the quarter. Robert B. Gillam’s McKinley Capital Management also made a $0.2 million investment in the stock during the quarter.
Let’s now take a look at hedge fund activity in other stocks similar to City Holding Company (NASDAQ:CHCO). These stocks are Gray Television, Inc. (NYSE:GTN), Nimble Storage Inc (NYSE:NMBL), Altra Holdings, Inc. (NASDAQ:AIMC), and DTS Inc. (NASDAQ:DTSI). This group of stocks’ market caps are similar to CHCO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GTN | 17 | 87248 | -3 |
| NMBL | 19 | 182228 | 5 |
| AIMC | 18 | 31889 | 5 |
| DTSI | 12 | 153212 | 5 |
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 $114 million. That figure was $42 million in CHCO’s case. Nimble Storage Inc (NYSE:NMBL) is the most popular stock in this table. On the other hand DTS Inc. (NASDAQ:DTSI) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks City Holding Company (NASDAQ:CHCO) is even less popular than DTSI. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
