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.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Canadian Imperial Bank of Commerce (NYSE:CM)? The smart money sentiment can provide an answer to this question.
Is Canadian Imperial Bank of Commerce (NYSE:CM) a superb investment today? Prominent investors are getting less bullish. The number of bullish hedge fund positions shrunk by 3 lately. Our calculations also showed that CM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are a lot of metrics shareholders put to use to evaluate their holdings. A pair of the less known metrics are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the best hedge fund managers can outperform the market by a superb amount (see the details here).
Dmitry Balyasny of Balyasny Asset Managemnet
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. With all of this in mind we’re going to take a peek at the new hedge fund action regarding Canadian Imperial Bank of Commerce (NYSE:CM).
Hedge fund activity in Canadian Imperial Bank of Commerce (NYSE:CM)
At Q4’s end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in CM 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the largest position in Canadian Imperial Bank of Commerce (NYSE:CM), worth close to $117.5 million, corresponding to 0.1% of its total 13F portfolio. Coming in second is Joseph Sirdevan of Galibier Capital Management, with a $37.3 million position; the fund has 11.8% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions contain Noam Gottesman’s GLG Partners, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Galibier Capital Management allocated the biggest weight to Canadian Imperial Bank of Commerce (NYSE:CM), around 11.85% of its 13F portfolio. Signition LP is also relatively very bullish on the stock, setting aside 1.27 percent of its 13F equity portfolio to CM.
Because Canadian Imperial Bank of Commerce (NYSE:CM) has experienced declining sentiment from hedge fund managers, logic holds that there exists a select few money managers that decided to sell off their full holdings by the end of the third quarter. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the biggest investment of the “upper crust” of funds followed by Insider Monkey, valued at about $8 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also dropped its stock, about $1.4 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 3 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Canadian Imperial Bank of Commerce (NYSE:CM) but similarly valued. We will take a look at Ford Motor Company (NYSE:F), Roper Technologies, Inc. (NYSE:ROP), Occidental Petroleum Corporation (NYSE:OXY), and The Allstate Corporation (NYSE:ALL). This group of stocks’ market values are closest to CM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| F | 36 | 1104113 | -4 |
| ROP | 40 | 1248081 | -1 |
| OXY | 44 | 2305548 | -18 |
| ALL | 37 | 1712738 | -11 |
| Average | 39.25 | 1592620 | -8.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.25 hedge funds with bullish positions and the average amount invested in these stocks was $1593 million. That figure was $241 million in CM’s case. Occidental Petroleum Corporation (NYSE:OXY) is the most popular stock in this table. On the other hand Ford Motor Company (NYSE:F) is the least popular one with only 36 bullish hedge fund positions. Compared to these stocks Canadian Imperial Bank of Commerce (NYSE:CM) is even less popular than F. Hedge funds dodged a bullet by taking a bearish stance towards CM. 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 11.7% in 2020 through March 11th but managed to beat the market by 3.1 percentage points. Unfortunately CM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CM investors were disappointed as the stock returned -25.3% 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 Q1.
Disclosure: None. This article was originally published at Insider Monkey.
