Is Capitol Federal Financial, Inc. (NASDAQ:CFFN) 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.
Capitol Federal Financial, Inc. (NASDAQ:CFFN) investors should pay attention to an increase in hedge fund interest recently. Our calculations also showed that CFFN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a gander at the recent hedge fund action regarding Capitol Federal Financial, Inc. (NASDAQ:CFFN).
How have hedgies been trading Capitol Federal Financial, Inc. (NASDAQ:CFFN)?
At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 27% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CFFN over the last 17 quarters. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the number one position in Capitol Federal Financial, Inc. (NASDAQ:CFFN). Renaissance Technologies has a $115.4 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Robert Rodriguez and Steven Romick of First Pacific Advisors, with a $7.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism contain Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, David E. Shaw’s D E Shaw and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Azora Capital allocated the biggest weight to Capitol Federal Financial, Inc. (NASDAQ:CFFN), around 0.22% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, earmarking 0.14 percent of its 13F equity portfolio to CFFN.
As aggregate interest increased, some big names have jumped into Capitol Federal Financial, Inc. (NASDAQ:CFFN) headfirst. Winton Capital Management, managed by David Harding, initiated the biggest position in Capitol Federal Financial, Inc. (NASDAQ:CFFN). Winton Capital Management had $2 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also made a $0.5 million investment in the stock during the quarter. The only other fund with a brand new CFFN position is Steve Cohen’s Point72 Asset Management.
Let’s check out hedge fund activity in other stocks similar to Capitol Federal Financial, Inc. (NASDAQ:CFFN). We will take a look at Evoqua Water Technologies Corp. (NYSE:AQUA), Cal-Maine Foods Inc (NASDAQ:CALM), Avon Products, Inc. (NYSE:AVP), and Cleveland-Cliffs Inc (NYSE:CLF). This group of stocks’ market caps resemble CFFN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AQUA | 14 | 151340 | 1 |
| CALM | 20 | 184662 | 4 |
| AVP | 21 | 314685 | 3 |
| CLF | 26 | 297021 | -2 |
| Average | 20.25 | 236927 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $237 million. That figure was $145 million in CFFN’s case. Cleveland-Cliffs Inc (NYSE:CLF) is the most popular stock in this table. On the other hand Evoqua Water Technologies Corp. (NYSE:AQUA) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Capitol Federal Financial, Inc. (NASDAQ:CFFN) is even less popular than AQUA. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on CFFN, though not to the same extent, as the stock returned 6% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
