At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (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. In this article, we will take a closer look at hedge fund sentiment towards Columbia Banking System Inc (NASDAQ:COLB) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Is Columbia Banking System Inc (NASDAQ:COLB) going to take off soon? The best stock pickers were becoming hopeful. The number of long hedge fund bets rose by 2 recently. Our calculations also showed that COLB 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.
Cliff Asness of AQR 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 we’re going to go over the fresh hedge fund action surrounding Columbia Banking System Inc (NASDAQ:COLB).
How have hedgies been trading Columbia Banking System Inc (NASDAQ:COLB)?
At the end of the first quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards COLB over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
More specifically, Cardinal Capital was the largest shareholder of Columbia Banking System Inc (NASDAQ:COLB), with a stake worth $66.5 million reported as of the end of September. Trailing Cardinal Capital was Citadel Investment Group, which amassed a stake valued at $2.6 million. D E Shaw, Balyasny Asset Management, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Cardinal Capital allocated the biggest weight to Columbia Banking System Inc (NASDAQ:COLB), around 3.27% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, dishing out 0.05 percent of its 13F equity portfolio to COLB.
As aggregate interest increased, key money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the largest position in Columbia Banking System Inc (NASDAQ:COLB). Balyasny Asset Management had $1.6 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also initiated a $1.4 million position during the quarter. The other funds with new positions in the stock are Renaissance Technologies and Greg Eisner’s Engineers Gate Manager.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Columbia Banking System Inc (NASDAQ:COLB) but similarly valued. These stocks are Endava plc (NYSE:DAVA), Sanmina Corporation (NASDAQ:SANM), Viela Bio, Inc. (NASDAQ:VIE), and Federated Hermes, Inc. (NYSE:FHI). This group of stocks’ market values are closest to COLB’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DAVA | 9 | 54064 | 2 |
| SANM | 15 | 146797 | -6 |
| VIE | 6 | 291003 | 0 |
| FHI | 28 | 114653 | -1 |
| Average | 14.5 | 151629 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $152 million. That figure was $81 million in COLB’s case. Federated Hermes, Inc. (NYSE:FHI) is the most popular stock in this table. On the other hand Viela Bio, Inc. (NASDAQ:VIE) is the least popular one with only 6 bullish hedge fund positions. Columbia Banking System Inc (NASDAQ:COLB) 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. 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 and surpassed the market by 15.5 percentage points. Unfortunately COLB wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); COLB investors were disappointed as the stock returned 7.2% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
