Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Cambrex Corporation (NYSE:CBM).
Cambrex Corporation (NYSE:CBM) investors should be aware of a decrease in support from the world’s most elite money managers lately. CBM was in 12 hedge funds’ portfolios at the end of June. There were 13 hedge funds in our database with CBM positions at the end of the previous quarter. Our calculations also showed that CBM isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a gander at the recent hedge fund action regarding Cambrex Corporation (NYSE:CBM).
How have hedgies been trading Cambrex Corporation (NYSE:CBM)?
At the end of the second quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CBM over the last 16 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
The largest stake in Cambrex Corporation (NYSE:CBM) was held by Royce & Associates, which reported holding $14.7 million worth of stock at the end of March. It was followed by D E Shaw with a $4.7 million position. Other investors bullish on the company included Renaissance Technologies, Citadel Investment Group, and Marshall Wace LLP.
Due to the fact that Cambrex Corporation (NYSE:CBM) has experienced a decline in interest from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of money managers that decided to sell off their full holdings heading into Q3. It’s worth mentioning that Israel Englander’s Millennium Management cut the largest stake of the 750 funds tracked by Insider Monkey, comprising about $9 million in stock, and Hoon Kim’s Quantinno Capital was right behind this move, as the fund cut about $0.2 million worth. These moves are important to note, as total hedge fund interest dropped by 1 funds heading into Q3.
Let’s also examine hedge fund activity in other stocks similar to Cambrex Corporation (NYSE:CBM). We will take a look at Range Resources Corp. (NYSE:RRC), Chesapeake Utilities Corporation (NYSE:CPK), Cooper Tire & Rubber Company (NYSE:CTB), and Berkshire Hills Bancorp, Inc. (NYSE:BHLB). This group of stocks’ market valuations resemble CBM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RRC | 31 | 575476 | 0 |
| CPK | 9 | 37823 | -2 |
| CTB | 15 | 165487 | -2 |
| BHLB | 9 | 56410 | -4 |
| Average | 16 | 208799 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $209 million. That figure was $30 million in CBM’s case. Range Resources Corp. (NYSE:RRC) is the most popular stock in this table. On the other hand Chesapeake Utilities Corporation (NYSE:CPK) is the least popular one with only 9 bullish hedge fund positions. Cambrex Corporation (NYSE:CBM) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on CBM as the stock returned 27.1% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
