Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018. This means hedge funds that are allocating a higher percentage of their portfolio to small-cap stocks were probably underperforming the market. However, this also means that as small-cap stocks start to mean revert, these hedge funds will start delivering better returns than the S&P 500 Index funds. In this article, we will take a look at what hedge funds think about CapStar Financial Holdings, Inc. (NASDAQ:CSTR).
CapStar Financial Holdings, Inc. (NASDAQ:CSTR) investors should pay attention to an increase in support from the world’s most elite money managers recently. Our calculations also showed that CSTR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Joe Huber of Huber Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the key hedge fund action encompassing CapStar Financial Holdings, Inc. (NASDAQ:CSTR).
Hedge fund activity in CapStar Financial Holdings, Inc. (NASDAQ:CSTR)
Heading into the fourth quarter of 2019, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 100% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CSTR over the last 17 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the most valuable position in CapStar Financial Holdings, Inc. (NASDAQ:CSTR), worth close to $5.5 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by Elizabeth Park Capital Management, led by Fred Cummings, holding a $3.9 million position; the fund has 1.6% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions comprise Israel Englander’s Millennium Management, Joe Huber’s Huber Capital Management and David Harding’s Winton Capital Management. In terms of the portfolio weights assigned to each position Elizabeth Park Capital Management allocated the biggest weight to CapStar Financial Holdings, Inc. (NASDAQ:CSTR), around 1.55% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, setting aside 0.08 percent of its 13F equity portfolio to CSTR.
Consequently, key hedge funds were leading the bulls’ herd. Millennium Management, managed by Israel Englander, initiated the biggest position in CapStar Financial Holdings, Inc. (NASDAQ:CSTR). Millennium Management had $0.7 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $0.6 million position during the quarter. The following funds were also among the new CSTR investors: John Overdeck and David Siegel’s Two Sigma Advisors, Ken Griffin’s Citadel Investment Group, and Michael Gelband’s ExodusPoint Capital.
Let’s check out hedge fund activity in other stocks similar to CapStar Financial Holdings, Inc. (NASDAQ:CSTR). These stocks are Veritiv Corp (NYSE:VRTV), Seneca Foods Corp (NASDAQ:SENEA), OptiNose, Inc. (NASDAQ:OPTN), and Tetraphase Pharmaceuticals Inc (NASDAQ:TTPH). This group of stocks’ market values match CSTR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VRTV | 11 | 74905 | 2 |
| SENEA | 5 | 16044 | 2 |
| OPTN | 8 | 12280 | 2 |
| TTPH | 2 | 934 | -7 |
| Average | 6.5 | 26041 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $12 million in CSTR’s case. Veritiv Corp (NYSE:VRTV) is the most popular stock in this table. On the other hand Tetraphase Pharmaceuticals Inc (NASDAQ:TTPH) is the least popular one with only 2 bullish hedge fund positions. CapStar Financial Holdings, Inc. (NASDAQ:CSTR) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CSTR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CSTR were disappointed as the stock returned 1.6% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
