We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Commerce Bancshares, Inc. (NASDAQ:CBSH) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Commerce Bancshares, Inc. (NASDAQ:CBSH) a healthy stock for your portfolio? Prominent investors are buying. The number of bullish hedge fund positions inched up by 1 recently. Our calculations also showed that CBSH isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). CBSH was in 10 hedge funds’ portfolios at the end of December. There were 9 hedge funds in our database with CBSH holdings at the end of the previous quarter.
At the moment there are a lot of methods market participants can use to value publicly traded companies. Two of the most under-the-radar methods are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the best investment managers can outperform their index-focused peers by a very impressive margin (see the details here).
Ray Dalio of Bridgewater Associates
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. With all of this in mind let’s view the key hedge fund action surrounding Commerce Bancshares, Inc. (NASDAQ:CBSH).
What have hedge funds been doing with Commerce Bancshares, Inc. (NASDAQ:CBSH)?
At Q4’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the previous quarter. On the other hand, there were a total of 11 hedge funds with a bullish position in CBSH a year ago. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the number one position in Commerce Bancshares, Inc. (NASDAQ:CBSH). AQR Capital Management has a $29.9 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by David Harding of Winton Capital Management, with a $4.7 million position; 0.1% of its 13F portfolio is allocated to the company. Some other professional money managers with similar optimism comprise Brandon Haley’s Holocene Advisors, Ken Griffin’s Citadel Investment Group and Ray Dalio’s Bridgewater Associates. In terms of the portfolio weights assigned to each position Signition LP allocated the biggest weight to Commerce Bancshares, Inc. (NASDAQ:CBSH), around 2.06% of its 13F portfolio. Quantamental Technologies is also relatively very bullish on the stock, earmarking 0.18 percent of its 13F equity portfolio to CBSH.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Winton Capital Management, managed by David Harding, initiated the biggest position in Commerce Bancshares, Inc. (NASDAQ:CBSH). Winton Capital Management had $4.7 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also initiated a $1.6 million position during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw and Ran Pang’s Quantamental Technologies.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Commerce Bancshares, Inc. (NASDAQ:CBSH) but similarly valued. We will take a look at Qiagen NV (NYSE:QGEN), Hill-Rom Holdings, Inc. (NYSE:HRC), Levi Strauss & Co. (NYSE:LEVI), and Spirit AeroSystems Holdings, Inc. (NYSE:SPR). This group of stocks’ market values are similar to CBSH’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| QGEN | 51 | 585326 | 27 |
| HRC | 27 | 793647 | -2 |
| LEVI | 11 | 34219 | 1 |
| SPR | 48 | 1874707 | 9 |
| Average | 34.25 | 821975 | 8.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.25 hedge funds with bullish positions and the average amount invested in these stocks was $822 million. That figure was $43 million in CBSH’s case. Qiagen NV (NYSE:QGEN) is the most popular stock in this table. On the other hand Levi Strauss & Co. (NYSE:LEVI) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Commerce Bancshares, Inc. (NASDAQ:CBSH) is even less popular than LEVI. Hedge funds clearly dropped the ball on CBSH as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on CBSH as the stock returned -22% 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.
