Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). 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 Capitol Federal Financial, Inc. (NASDAQ:CFFN).
Is Capitol Federal Financial, Inc. (NASDAQ:CFFN) a splendid investment today? The smart money is taking an optimistic view. The number of long hedge fund positions increased by 2 recently. Our calculations also showed that CFFN 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). CFFN was in 16 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 14 hedge funds in our database with CFFN positions at the end of the previous quarter.
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 more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ray Dalio of Bridgewater Associates
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Now let’s check out the new hedge fund action surrounding Capitol Federal Financial, Inc. (NASDAQ:CFFN).
How are hedge funds trading Capitol Federal Financial, Inc. (NASDAQ:CFFN)?
Heading into the first quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CFFN over the last 18 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in Capitol Federal Financial, Inc. (NASDAQ:CFFN) was held by Renaissance Technologies, which reported holding $113.1 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $7.8 million position. Other investors bullish on the company included First Pacific Advisors LLC, Citadel Investment Group, and Millennium Management. In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Capitol Federal Financial, Inc. (NASDAQ:CFFN), around 0.09% of its 13F portfolio. Dorset Management is also relatively very bullish on the stock, setting aside 0.05 percent of its 13F equity portfolio to CFFN.
Now, specific money managers have been driving this bullishness. ExodusPoint Capital, managed by Michael Gelband, assembled the largest position in Capitol Federal Financial, Inc. (NASDAQ:CFFN). ExodusPoint Capital had $0.4 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also made a $0.4 million investment in the stock during the quarter. The following funds were also among the new CFFN investors: Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Donald Sussman’s Paloma Partners, and Qing Li’s Sciencast Management.
Let’s now review hedge fund activity in other stocks similar to Capitol Federal Financial, Inc. (NASDAQ:CFFN). These stocks are Pacific Premier Bancorp, Inc. (NASDAQ:PPBI), Knowles Corp (NYSE:KN), Ping Identity Holding Corp. (NYSE:PING), and Columbia Financial, Inc. (NASDAQ:CLBK). This group of stocks’ market caps are similar to CFFN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PPBI | 12 | 47542 | 4 |
| KN | 29 | 307346 | 1 |
| PING | 10 | 38698 | -8 |
| CLBK | 11 | 46457 | 1 |
| Average | 15.5 | 110011 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $110 million. That figure was $143 million in CFFN’s case. Knowles Corp (NYSE:KN) is the most popular stock in this table. On the other hand Ping Identity Holding Corp. (NYSE:PING) is the least popular one with only 10 bullish hedge fund positions. Capitol Federal Financial, Inc. (NASDAQ:CFFN) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.0% in 2020 through April 6th but still beat the market by 4.2 percentage points. Hedge funds were also right about betting on CFFN, though not to the same extent, as the stock returned -16.1% during the first three months of 2020 (through April 6th) and outperformed the market as well.
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.
