Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Capitala Finance Corp (NASDAQ:CPTA).
Is Capitala Finance Corp (NASDAQ:CPTA) a healthy stock for your portfolio? Money managers are turning less bullish. The number of long hedge fund bets decreased by 2 lately. Our calculations also showed that CPTA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 51 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Griffin of Citadel Investment Group
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the 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 go over the key hedge fund action regarding Capitala Finance Corp (NASDAQ:CPTA).
What have hedge funds been doing with Capitala Finance Corp (NASDAQ:CPTA)?
At Q1’s end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from one quarter earlier. On the other hand, there were a total of 3 hedge funds with a bullish position in CPTA a year ago. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, John Overdeck and David Siegel’s Two Sigma Advisors has the number one position in Capitala Finance Corp (NASDAQ:CPTA), worth close to $0.7 million, amounting to less than 0.1%% of its total 13F portfolio. On Two Sigma Advisors’s heels is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $0.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions comprise D. E. Shaw’s D E Shaw, Michael Gelband’s ExodusPoint Capital and . In terms of the portfolio weights assigned to each position Two Sigma Advisors allocated the biggest weight to Capitala Finance Corp (NASDAQ:CPTA), around 0.0025% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, dishing out 0.0023 percent of its 13F equity portfolio to CPTA.
Since Capitala Finance Corp (NASDAQ:CPTA) has witnessed falling interest from the smart money, logic holds that there is a sect of money managers that slashed their positions entirely last quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the largest position of the 750 funds watched by Insider Monkey, comprising an estimated $0.2 million in stock. Ken Griffin’s fund, Citadel Investment Group, also sold off its stock, about $0.1 million worth. These transactions are interesting, as total hedge fund interest fell by 2 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Capitala Finance Corp (NASDAQ:CPTA). These stocks are Charah Solutions, Inc. (NYSE:CHRA), Daxor Corporation (NYSE:DXR), Hovnanian Enterprises, Inc. (NYSE:HOV), and Zovio Inc. (NASDAQ:ZVO). All of these stocks’ market caps are similar to CPTA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CHRA | 1 | 2385 | -1 |
| DXR | 3 | 458 | 1 |
| HOV | 5 | 5682 | -2 |
| ZVO | 8 | 12673 | -4 |
| Average | 4.25 | 5300 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.25 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $1 million in CPTA’s case. Zovio Inc. (NASDAQ:ZVO) is the most popular stock in this table. On the other hand Charah Solutions, Inc. (NYSE:CHRA) is the least popular one with only 1 bullish hedge fund positions. Capitala Finance Corp (NASDAQ:CPTA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately CPTA wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CPTA investors were disappointed as the stock returned -8% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
