Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.
Is Charter Financial Corp (NASDAQ:CHFN) an exceptional investment right now? Prominent investors are really becoming less hopeful. The number of bullish hedge fund positions that are disclosed in regulatory 13F filings went down by 3 in recent months. In this way, there were 7 hedge funds in our database with CHFN positions at the end of the last quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Transenterix Inc (NYSEMKT:TRXC), Uniqure NV (NASDAQ:QURE), and Kirkland’s, Inc. (NASDAQ:KIRK) to gather more data points.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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What does the smart money think about Charter Financial Corp (NASDAQ:CHFN)?
At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, down by 30% from one quarter earlier. By comparison, 10 hedge funds held shares or bullish call options in CHFN heading into this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Gregg J. Powers’ Private Capital Management has the largest position in Charter Financial Corp (NASDAQ:CHFN), worth close to $13.6 million, amounting to 2% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies, one of the largest hedge funds in the world, which holds a $11.7 million position. Remaining peers that are bullish include Amy Minella’s Cardinal Capital, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Seeing as Charter Financial Corp (NASDAQ:CHFN) has gone through a decline in interest from the entirety of the hedge funds we track, we can see that there exists a select few funds that elected to cut their positions entirely heading into Q4. Intriguingly, Peter Muller’s PDT Partners cut the largest investment of all the hedgies watched by Insider Monkey, worth an estimated $0.5 million in stock, and Prasad Phatak and Chris Koranda’s Tappan Street Partners was right behind this move, as the fund dumped about $0.4 million worth of shares.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Charter Financial Corp (NASDAQ:CHFN) but similarly valued. These stocks are Transenterix Inc (NYSEMKT:TRXC), Uniqure NV (NASDAQ:QURE), Kirkland’s, Inc. (NASDAQ:KIRK), and HC2 Holdings Inc (NYSEMKT:HCHC). This group of stocks’ market values are closest to CHFN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TRXC | 5 | 25981 | -1 |
| QURE | 12 | 24678 | -3 |
| KIRK | 11 | 55173 | -1 |
| HCHC | 10 | 19674 | 3 |
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $29 million in CHFN’s case. Uniqure NV (NASDAQ:QURE) is the most popular stock in this table. On the other hand Transenterix Inc (NYSEMKT:TRXC) is the least popular one with only 5 bullish hedge fund positions. Charter Financial Corp (NASDAQ:CHFN) 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 QURE might be a better candidate to consider taking a long position in.
Disclosure: None
