Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (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. At Insider Monkey, we pore over the filings of nearly 835 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not CVB Financial Corp. (NASDAQ:CVBF) makes for a good investment right now.
Hedge fund interest in CVB Financial Corp. (NASDAQ:CVBF) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare CVBF to other stocks including Cantel Medical Corp. (NYSE:CMD), YETI Holdings, Inc. (NYSE:YETI), and Teradata Corporation (NYSE:TDC) to get a better sense of its popularity.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
David E. Shaw of D.E. Shaw
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. Keeping this in mind we’re going to take a glance at the new hedge fund action encompassing CVB Financial Corp. (NASDAQ:CVBF).
How are hedge funds trading CVB Financial Corp. (NASDAQ:CVBF)?
At the end of the fourth quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CVBF over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in CVB Financial Corp. (NASDAQ:CVBF) was held by Renaissance Technologies, which reported holding $27.1 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $7.2 million position. Other investors bullish on the company included D E Shaw, Millennium Management, and Fisher Asset Management. In terms of the portfolio weights assigned to each position AlphaCrest Capital Management allocated the biggest weight to CVB Financial Corp. (NASDAQ:CVBF), around 0.06% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to CVBF.
Since CVB Financial Corp. (NASDAQ:CVBF) has experienced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there were a few money managers who sold off their full holdings heading into Q4. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the largest stake of all the hedgies followed by Insider Monkey, totaling close to $2.2 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund sold off about $0.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to CVB Financial Corp. (NASDAQ:CVBF). We will take a look at Cantel Medical Corp. (NYSE:CMD), YETI Holdings, Inc. (NYSE:YETI), Teradata Corporation (NYSE:TDC), and Colliers International Group Inc (NASDAQ:CIGI). This group of stocks’ market valuations match CVBF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CMD | 11 | 103149 | -2 |
| YETI | 17 | 146486 | 6 |
| TDC | 28 | 240705 | 5 |
| CIGI | 13 | 756614 | 2 |
| Average | 17.25 | 311739 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $312 million. That figure was $47 million in CVBF’s case. Teradata Corporation (NYSE:TDC) is the most popular stock in this table. On the other hand Cantel Medical Corp. (NYSE:CMD) is the least popular one with only 11 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. 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 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on CVBF as the stock returned -15.2% during the same time period and outperformed the market by an even larger margin.
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.
