Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Hedge fund interest in Cathay General Bancorp (NASDAQ:CATY) shares was flat at the end of last quarter; 12 investors reported long positions in the company at the end of September. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as EverBank Financial Corp (NYSE:EVER), BGC Partners, Inc. (NASDAQ:BGCP), and Eastgroup Properties Inc (NYSE:EGP) to gather more data points.
Follow Cathay General Bancorp (NASDAQ:CATY)
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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What have hedge funds been doing with Cathay General Bancorp (NASDAQ:CATY)?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in CATY heading into this year. So, let’s find 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, Dmitry Balyasny’s Balyasny Asset Management has the most valuable position in Cathay General Bancorp (NASDAQ:CATY), worth close to $17.9 million. Sitting at the No. 2 spot is Ionic Capital Management, led by Bart Baum, which holds a $4.3 million position. Some other hedge funds and institutional investors that are bullish include Cliff Asness’ AQR Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Renaissance Technologies, one of the largest hedge funds in the world. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Judging by the fact that Cathay General Bancorp (NASDAQ:CATY) has faced declining sentiment from hedge fund managers, we can see that there exists a select few funds that decided to sell off their full holdings last quarter. Interestingly, Principal Global Investors’ Columbus Circle Investors got rid of the largest stake of all the hedgies studied by Insider Monkey, worth an estimated $4.9 million in stock. Paul Tudor Jones’ fund, Tudor Investment Corp, also said goodbye to its stock, about $0.6 million worth.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Cathay General Bancorp (NASDAQ:CATY) but similarly valued. We will take a look at EverBank Financial Corp (NYSE:EVER), BGC Partners, Inc. (NASDAQ:BGCP), Eastgroup Properties Inc (NYSE:EGP), and LendingClub Corp (NYSE:LC). This group of stocks’ market caps are similar to CATY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EVER | 16 | 510217 | 7 |
| BGCP | 18 | 97918 | -2 |
| EGP | 8 | 12198 | 2 |
| LC | 24 | 237509 | 0 |
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $214 million. That figure was $39 million in CATY’s case. LendingClub Corp (NYSE:LC) is the most popular stock in this table. On the other hand Eastgroup Properties Inc (NYSE:EGP) is the least popular one with only 8 bullish hedge fund positions. Cathay General Bancorp (NASDAQ:CATY) 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. In this regard LC might be a better candidate to consider taking a long position in.
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