Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Index returned approximately 12.1% in the first 5 months of this year through May 30th (including dividend payments). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 18.7% during the same 5-month period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ stock picks rather than directly investing in hedge funds. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like CBL & Associates Properties, Inc. (NYSE:CBL).
CBL & Associates Properties, Inc. (NYSE:CBL) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 15 hedge funds’ portfolios at the end of the first quarter of 2019. At the end of this article we will also compare CBL to other stocks including CASI Pharmaceuticals Inc (NASDAQ:CASI), SilverBow Resorces, Inc. (NYSE:SBOW), and Enochian Biosciences Inc. (NASDAQ:ENOB) to get a better sense of its popularity.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s review the key hedge fund action regarding CBL & Associates Properties, Inc. (NYSE:CBL).
How are hedge funds trading CBL & Associates Properties, Inc. (NYSE:CBL)?
At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in CBL a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Millennium Management was the largest shareholder of CBL & Associates Properties, Inc. (NYSE:CBL), with a stake worth $3.5 million reported as of the end of March. Trailing Millennium Management was Renaissance Technologies, which amassed a stake valued at $2.6 million. Ellington, ZWEIG DIMENNA PARTNERS, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that CBL & Associates Properties, Inc. (NYSE:CBL) has experienced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there were a few fund managers who were dropping their positions entirely in the third quarter. It’s worth mentioning that Chuck Royce’s Royce & Associates said goodbye to the biggest position of all the hedgies tracked by Insider Monkey, valued at close to $0.5 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund cut about $0 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to CBL & Associates Properties, Inc. (NYSE:CBL). These stocks are CASI Pharmaceuticals Inc (NASDAQ:CASI), SilverBow Resources, Inc. (NYSE:SBOW), Enochian Biosciences Inc. (NASDAQ:ENOB), and Central Valley Community Bancorp (NASDAQ:CVCY). This group of stocks’ market valuations resemble CBL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CASI | 4 | 452 | 2 |
| SBOW | 6 | 160979 | -1 |
| ENOB | 4 | 947 | 4 |
| CVCY | 4 | 17576 | 1 |
| Average | 4.5 | 44989 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.5 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $14 million in CBL’s case. SilverBow Resources, Inc. (NYSE:SBOW) is the most popular stock in this table. On the other hand CASI Pharmaceuticals Inc (NASDAQ:CASI) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks CBL & Associates Properties, Inc. (NYSE:CBL) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately CBL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CBL were disappointed as the stock returned -22.6% during the same 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 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
