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 13.1% in the first 2.5 months of this year (including dividend payments). Conversely, hedge funds’ top 15 large-cap stock picks generated a return of 19.7% during the same 2.5-month period, with 93% of these stock picks outperforming the broader market benchmark. An average long/short hedge fund returned only 5% 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 Camden National Corporation (NASDAQ:CAC).
Camden National Corporation (NASDAQ:CAC) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of December. At the end of this article we will also compare CAC to other stocks including Weatherford International plc (NYSE:WFT), Global Brass and Copper Holdings Inc (NYSE:BRSS), and Equity Bancshares, Inc. (NASDAQ:EQBK) 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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We’re going to analyze the new hedge fund action surrounding Camden National Corporation (NASDAQ:CAC).
What have hedge funds been doing with Camden National Corporation (NASDAQ:CAC)?
At the end of the fourth quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 7 hedge funds held shares or bullish call options in CAC a year ago. So, let’s check out 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, Royce & Associates, managed by Chuck Royce, holds the number one position in Camden National Corporation (NASDAQ:CAC). Royce & Associates has a $20.7 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, managed by Jim Simons, which holds a $17 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism comprise Matthew Lindenbaum’s Basswood Capital, Israel Englander’s Millennium Management and Cliff Asness’s AQR Capital Management.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Zebra Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Millennium Management).
Let’s now review hedge fund activity in other stocks similar to Camden National Corporation (NASDAQ:CAC). We will take a look at Weatherford International plc (NYSE:WFT), Global Brass and Copper Holdings Inc (NYSE:BRSS), Equity Bancshares, Inc. (NASDAQ:EQBK), and BBX Capital Corporation (NYSE:BBX). All of these stocks’ market caps match CAC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WFT | 22 | 78735 | 1 |
| BRSS | 15 | 53276 | -2 |
| EQBK | 7 | 55617 | 0 |
| BBX | 15 | 43502 | 0 |
| Average | 14.75 | 57783 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $51 million in CAC’s case. Weatherford International plc (NYSE:WFT) is the most popular stock in this table. On the other hand Equity Bancshares, Inc. (NASDAQ:EQBK) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Camden National Corporation (NASDAQ:CAC) is even less popular than EQBK. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on CAC, though not to the same extent, as the stock returned 17.9% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
