Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (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. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Columbia Banking System Inc (NASDAQ:COLB).
Columbia Banking System Inc (NASDAQ:COLB) investors should pay attention to an increase in enthusiasm from smart money of late. Our calculations also showed that COLB 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).
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.
Ken Fisher of Fisher Asset Management
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 take a look at the recent hedge fund action encompassing Columbia Banking System Inc (NASDAQ:COLB).
What does smart money think about Columbia Banking System Inc (NASDAQ:COLB)?
Heading into the first quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the third quarter of 2019. On the other hand, there were a total of 10 hedge funds with a bullish position in COLB a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Amy Minella’s Cardinal Capital has the biggest position in Columbia Banking System Inc (NASDAQ:COLB), worth close to $101.5 million, accounting for 3.1% of its total 13F portfolio. On Cardinal Capital’s heels is Fisher Asset Management, managed by Ken Fisher, which holds a $2.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other peers that are bullish encompass D. E. Shaw’s D E Shaw, Israel Englander’s Millennium Management and Donald Sussman’s Paloma Partners. In terms of the portfolio weights assigned to each position Cardinal Capital allocated the biggest weight to Columbia Banking System Inc (NASDAQ:COLB), around 3.1% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, setting aside 0.05 percent of its 13F equity portfolio to COLB.
As aggregate interest increased, key hedge funds were breaking ground themselves. AlphaCrest Capital Management, managed by Mika Toikka, established the biggest position in Columbia Banking System Inc (NASDAQ:COLB). AlphaCrest Capital Management had $0.6 million invested in the company at the end of the quarter. Karim Abbadi and Edward McBride’s Centiva Capital also initiated a $0.5 million position during the quarter. The only other fund with a brand new COLB position is Brandon Haley’s Holocene Advisors.
Let’s now take a look at hedge fund activity in other stocks similar to Columbia Banking System Inc (NASDAQ:COLB). We will take a look at South State Corporation (NASDAQ:SSB), Universal Forest Products, Inc. (NASDAQ:UFPI), NovaGold Resources Inc. (NYSE:NG), and Evercore Inc. (NYSE:EVR). All of these stocks’ market caps match COLB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SSB | 15 | 63154 | -3 |
| UFPI | 27 | 102127 | 5 |
| NG | 16 | 352933 | 0 |
| EVR | 32 | 316470 | -1 |
| Average | 22.5 | 208671 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $209 million. That figure was $109 million in COLB’s case. Evercore Inc. (NYSE:EVR) is the most popular stock in this table. On the other hand South State Corporation (NASDAQ:SSB) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Columbia Banking System Inc (NASDAQ:COLB) is even less popular than SSB. Hedge funds dodged a bullet by taking a bearish stance towards COLB. Our calculations showed that the top 20 most popular hedge fund stocks 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 managed to beat the market by 4.2 percentage points. Unfortunately COLB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); COLB investors were disappointed as the stock returned -37.6% during the same time period 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 most of these stocks already outperformed the market so far in 2020.
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.
