“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Community Bank System, Inc. (NYSE:CBU).
Community Bank System, Inc. (NYSE:CBU) investors should pay attention to an increase in hedge fund sentiment of late. CBU was in 13 hedge funds’ portfolios at the end of the third quarter of 2019. There were 12 hedge funds in our database with CBU positions at the end of the previous quarter. Our calculations also showed that CBU 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 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 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.
Israel Englander of Millennium 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 glance at the new hedge fund action encompassing Community Bank System, Inc. (NYSE:CBU).
Hedge fund activity in Community Bank System, Inc. (NYSE:CBU)
At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in CBU a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Israel Englander’s Millennium Management has the most valuable position in Community Bank System, Inc. (NYSE:CBU), worth close to $6.5 million, corresponding to less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Ken Griffin of Citadel Investment Group, with a $4.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers that hold long positions comprise Noam Gottesman’s GLG Partners, David E. Shaw’s D E Shaw and Dmitry Balyasny’s Balyasny Asset Management. In terms of the portfolio weights assigned to each position Minerva Advisors allocated the biggest weight to Community Bank System, Inc. (NYSE:CBU), around 0.56% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, dishing out 0.03 percent of its 13F equity portfolio to CBU.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Tudor Investment Corp, managed by Paul Tudor Jones, initiated the largest position in Community Bank System, Inc. (NYSE:CBU). Tudor Investment Corp had $0.3 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners 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 Community Bank System, Inc. (NYSE:CBU) but similarly valued. These stocks are Watts Water Technologies Inc (NYSE:WTS), II-VI, Inc. (NASDAQ:IIVI), Embraer SA (NYSE:ERJ), and UMB Financial Corporation (NASDAQ:UMBF). This group of stocks’ market caps match CBU’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WTS | 22 | 266224 | 7 |
| IIVI | 31 | 200487 | 10 |
| ERJ | 13 | 76731 | 6 |
| UMBF | 14 | 77629 | -2 |
| Average | 20 | 155268 | 5.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $155 million. That figure was $24 million in CBU’s case. II-VI, Inc. (NASDAQ:IIVI) is the most popular stock in this table. On the other hand Embraer SA (NYSE:ERJ) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Community Bank System, Inc. (NYSE:CBU) is even less popular than ERJ. 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. A small number of hedge funds were also right about betting on CBU, though not to the same extent, as the stock returned 10% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
