We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Columbia Financial, Inc. (NASDAQ:CLBK) is a good investment 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.
Is Columbia Financial, Inc. (NASDAQ:CLBK) the right investment to pursue these days? Prominent investors are in a bullish mood. The number of bullish hedge fund positions improved by 1 in recent months. Our calculations also showed that CLBK 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).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Michael Price of MFP Investors
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Now let’s go over the latest hedge fund action regarding Columbia Financial, Inc. (NASDAQ:CLBK).
What does smart money think about Columbia Financial, Inc. (NASDAQ:CLBK)?
At the end of the fourth quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from one quarter earlier. By comparison, 6 hedge funds held shares or bullish call options in CLBK a year ago. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Columbia Financial, Inc. (NASDAQ:CLBK), with a stake worth $13.4 million reported as of the end of September. Trailing Renaissance Technologies was Ancora Advisors, which amassed a stake valued at $10.3 million. Seidman Investment Partnership, MFP Investors, and Winton Capital Management 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 Seidman Investment Partnership allocated the biggest weight to Columbia Financial, Inc. (NASDAQ:CLBK), around 8.71% of its 13F portfolio. MFP Investors is also relatively very bullish on the stock, setting aside 1.07 percent of its 13F equity portfolio to CLBK.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, initiated the most valuable position in Columbia Financial, Inc. (NASDAQ:CLBK). Citadel Investment Group had $0.3 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0.3 million position during the quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Columbia Financial, Inc. (NASDAQ:CLBK) but similarly valued. These stocks are SPS Commerce, Inc. (NASDAQ:SPSC), Safehold Inc. (NYSE:SAFE), BMC Stock Holdings, Inc. (NASDAQ:BMCH), and Bloomin’ Brands Inc (NASDAQ:BLMN). This group of stocks’ market values resemble CLBK’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SPSC | 24 | 197277 | 4 |
| SAFE | 7 | 16346 | -1 |
| BMCH | 29 | 335228 | 0 |
| BLMN | 18 | 220934 | 0 |
| Average | 19.5 | 192446 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $192 million. That figure was $46 million in CLBK’s case. BMC Stock Holdings, Inc. (NASDAQ:BMCH) is the most popular stock in this table. On the other hand Safehold Inc. (NYSE:SAFE) is the least popular one with only 7 bullish hedge fund positions. Columbia Financial, Inc. (NASDAQ:CLBK) is not the least popular stock in this group but hedge fund interest is still below average. 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 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. A small number of hedge funds were also right about betting on CLBK, though not to the same extent, as the stock returned -15.9% during the same time period and outperformed the market.
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.
