Hedge Funds Are Buying Columbus McKinnon Corp. (CMCO)

Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the 12-month period ending October 30. However, 63% of hedge funds’ top 30 stock picks from the index did beat the market, and returned nearly twice as much on average as the index. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.

Columbus McKinnon Corp. (NASDAQ:CMCO) was in 14 hedge funds’ portfolios at the end of September. CMCO shareholders have witnessed an increase in support from the world’s most elite money managers lately. There were 10 hedge funds in our database with CMCO holdings at the end of the previous quarter. At the end of this article we will also compare CMCO to other stocks, including TubeMogul Inc (NASDAQ:TUBE), Ascent Capital Group Inc (NASDAQ:ASCMA), and Park-Ohio Holdings Corp. (NASDAQ:PKOH) to get a better sense of its popularity.

At the moment there are several indicators stock traders can use to assess their stock investments. A couple of the best indicators are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the top money managers can trounce the broader indices by a healthy amount (see the details here).

Now, we’re going to go over the new action regarding Columbus McKinnon Corp. (NASDAQ:CMCO).

What does the smart money think about Columbus McKinnon Corp. (NASDAQ:CMCO)?

Heading into Q4, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 40% from the second quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Pzena Investment Management, managed by Richard S. Pzena, holds the largest position in Columbus McKinnon Corp. (NASDAQ:CMCO). Pzena Investment Management has an $20.2 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Royce & Associates, led by Chuck Royce, holding an $13.4 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism consist of Julian Allen’s Spitfire Capital, Peter Schliemann’s Rutabaga Capital Management and Mark Lee’s Forest Hill Capital.

As aggregate interest increased, some big names were leading the bulls’ herd. Millennium Management, managed by Israel Englander, created the largest position in Columbus McKinnon Corp. (NASDAQ:CMCO). Millennium Management had $2.5 million invested in the company at the end of the quarter. Ken Gray and Steve Walsh’s Bryn Mawr Capital also initiated an $0.6 million position during the quarter. The following funds were also among the new CMCO investors: Ken Griffin’s Citadel Investment Group, Glenn Russell Dubin’s Highbridge Capital Management, and Chao Ku’s Nine Chapters Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Columbus McKinnon Corp. (NASDAQ:CMCO) but similarly valued. These stocks are TubeMogul Inc (NASDAQ:TUBE), Ascent Capital Group Inc (NASDAQ:ASCMA), Park-Ohio Holdings Corp. (NASDAQ:PKOH), and Citi Trends, Inc. (NASDAQ:CTRN). This group of stocks’ market caps match CMCO’s market cap.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $60 million, versus $62 million in CMCO’s case. Citi Trends, Inc. (NASDAQ:CTRN) is the most popular stock in this table. On the other hand Park-Ohio Holdings Corp. (NASDAQ:PKOH) is the least popular one with only 6 bullish hedge fund positions. Columbus McKinnon Corp. (NASDAQ:CMCO) 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. In this regard CTRN might be a better candidate to consider a long position.