Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the fourth quarter, many investors lost money due to unpredictable events such as the sudden increase in long-term interest rates and unintended consequences of the trade war with China. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to CVB Financial Corp. (NASDAQ:CVBF) changed recently.
CVB Financial Corp. (NASDAQ:CVBF) investors should pay attention to an increase in hedge fund sentiment of late. CVBF was in 11 hedge funds’ portfolios at the end of the third quarter of 2018. There were 6 hedge funds in our database with CVBF positions at the end of the previous quarter. Our calculations also showed that CVBF isn’t among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
Let’s check out the fresh hedge fund action surrounding CVB Financial Corp. (NASDAQ:CVBF).
How are hedge funds trading CVB Financial Corp. (NASDAQ:CVBF)?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 83% from the previous quarter. On the other hand, there were a total of 6 hedge funds with a bullish position in CVBF at the beginning of this year. 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, Arrowstreet Capital held the most valuable stake in CVB Financial Corp. (NASDAQ:CVBF), which was worth $12.6 million at the end of the third quarter. On the second spot was Balyasny Asset Management which amassed $12.1 million worth of shares. Moreover, Two Sigma Advisors, D E Shaw, and GLG Partners were also bullish on CVB Financial Corp. (NASDAQ:CVBF), allocating a large percentage of their portfolios to this stock.
Now, key hedge funds were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the biggest position in CVB Financial Corp. (NASDAQ:CVBF). Balyasny Asset Management had $12.1 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s now take a look at hedge fund activity in other stocks similar to CVB Financial Corp. (NASDAQ:CVBF). These stocks are Community Bank System, Inc. (NYSE:CBU), Moog Inc (NYSE:MOG), Acadia Healthcare Company Inc (NASDAQ:ACHC), and Black Hills Corporation (NYSE:BKH). All of these stocks’ market caps are similar to CVBF’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CBU | 9 | 23697 | 1 |
| MOG | 13 | 66365 | -5 |
| ACHC | 19 | 290488 | 2 |
| BKH | 19 | 191977 | 5 |
| Average | 15 | 143132 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $46 million in CVBF’s case. Acadia Healthcare Company Inc (NASDAQ:ACHC) is the most popular stock in this table. On the other hand Community Bank System, Inc. (NYSE:CBU) is the least popular one with only 9 bullish hedge fund positions. CVB Financial Corp. (NASDAQ:CVBF) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ACHC might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
