Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Is Comerica Incorporated (NYSE:CMA) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is Comerica Incorporated (NYSE:CMA) a buy, sell, or hold? The best stock pickers are buying. The number of long hedge fund bets increased by 4 recently. Our calculations also showed that CMA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). CMA was in 36 hedge funds’ portfolios at the end of December. There were 32 hedge funds in our database with CMA positions at the end of the previous quarter.
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 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Harding of Winton Capital Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s view the recent hedge fund action regarding Comerica Incorporated (NYSE:CMA).
How are hedge funds trading Comerica Incorporated (NYSE:CMA)?
Heading into the first quarter of 2020, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CMA over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in Comerica Incorporated (NYSE:CMA), which was worth $153 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $95.4 million worth of shares. Citadel Investment Group, D E Shaw, 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 Third Avenue Management allocated the biggest weight to Comerica Incorporated (NYSE:CMA), around 2.35% of its 13F portfolio. BlueMar Capital Management is also relatively very bullish on the stock, earmarking 0.48 percent of its 13F equity portfolio to CMA.
As industrywide interest jumped, specific money managers have been driving this bullishness. Voleon Capital, managed by Michael Kharitonov and Jon David McAuliffe, established the largest position in Comerica Incorporated (NYSE:CMA). Voleon Capital had $6.3 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also made a $5.4 million investment in the stock during the quarter. The following funds were also among the new CMA investors: Renaissance Technologies, Brian Ashford-Russell and Tim Woolley’s Polar Capital, and David Rodriguez-Fraile’s BlueMar Capital Management.
Let’s check out hedge fund activity in other stocks similar to Comerica Incorporated (NYSE:CMA). We will take a look at Tradeweb Markets Inc. (NASDAQ:TW), Companhia de Saneamento Basico do Estado de Sao Paulo – SABESP (NYSE:SBS), Camden Property Trust (NYSE:CPT), and Huntington Ingalls Industries Inc (NYSE:HII). All of these stocks’ market caps resemble CMA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TW | 36 | 566781 | -2 |
| SBS | 12 | 446923 | 1 |
| CPT | 31 | 471165 | 9 |
| HII | 22 | 596671 | 3 |
| Average | 25.25 | 520385 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $520 million. That figure was $542 million in CMA’s case. Tradeweb Markets Inc. (NASDAQ:TW) is the most popular stock in this table. On the other hand Companhia de Saneamento Basico do Estado de Sao Paulo – SABESP (NYSE:SBS) is the least popular one with only 12 bullish hedge fund positions. Comerica Incorporated (NYSE:CMA) 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately CMA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CMA were disappointed as the stock returned -55.4% 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
