The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtCapStar Financial Holdings, Inc. (NASDAQ:CSTR) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.
CapStar Financial Holdings, Inc. (NASDAQ:CSTR) was in 10 hedge funds’ portfolios at the end of the first quarter of 2020. CSTR shareholders have witnessed an increase in enthusiasm from smart money recently. There were 5 hedge funds in our database with CSTR positions at the end of the previous quarter. Our calculations also showed that CSTR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Paul Isaac of Arbiter Partners Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the recent hedge fund action surrounding CapStar Financial Holdings, Inc. (NASDAQ:CSTR).
What have hedge funds been doing with CapStar Financial Holdings, Inc. (NASDAQ:CSTR)?
Heading into the second quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CSTR 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.
According to Insider Monkey’s hedge fund database, Renaissance Technologies has the largest position in CapStar Financial Holdings, Inc. (NASDAQ:CSTR), worth close to $3.7 million, corresponding to less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Private Capital Management, led by Gregg J. Powers, holding a $1.5 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism contain Paul J. Isaac’s Arbiter Partners Capital Management, Ken Griffin’s Citadel Investment Group and David Harding’s Winton Capital Management. In terms of the portfolio weights assigned to each position Private Capital Management allocated the biggest weight to CapStar Financial Holdings, Inc. (NASDAQ:CSTR), around 0.48% of its 13F portfolio. Fourthstone LLC is also relatively very bullish on the stock, dishing out 0.2 percent of its 13F equity portfolio to CSTR.
As one would reasonably expect, some big names have jumped into CapStar Financial Holdings, Inc. (NASDAQ:CSTR) headfirst. Private Capital Management, managed by Gregg J. Powers, initiated the largest position in CapStar Financial Holdings, Inc. (NASDAQ:CSTR). Private Capital Management had $1.5 million invested in the company at the end of the quarter. Paul J. Isaac’s Arbiter Partners Capital Management also initiated a $0.5 million position during the quarter. The following funds were also among the new CSTR investors: Ken Griffin’s Citadel Investment Group, Phil Stone’s Fourthstone LLC, and Thomas Bailard’s Bailard Inc.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as CapStar Financial Holdings, Inc. (NASDAQ:CSTR) but similarly valued. We will take a look at Cabaletta Bio, Inc. (NASDAQ:CABA), Tecnoglass Inc. (NASDAQ:TGLS), Viemed Healthcare, Inc. (NASDAQ:VMD), and VSE Corporation (NASDAQ:VSEC). This group of stocks’ market valuations are closest to CSTR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CABA | 9 | 69313 | 2 |
| TGLS | 5 | 6805 | 0 |
| VMD | 7 | 8912 | -1 |
| VSEC | 4 | 1723 | -1 |
| Average | 6.25 | 21688 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $22 million. That figure was $7 million in CSTR’s case. Cabaletta Bio, Inc. (NASDAQ:CABA) is the most popular stock in this table. On the other hand VSE Corporation (NASDAQ:VSEC) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks CapStar Financial Holdings, Inc. (NASDAQ:CSTR) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on CSTR, though not to the same extent, as the stock returned 21.9% in Q2 and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.
