Is Citizens Community Bancorp Inc. (CZWI) A Good Stock To Buy?

With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Citizens Community Bancorp Inc. (NASDAQ:CZWI).

Citizens Community Bancorp Inc. (NASDAQ:CZWI) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds’ portfolios at the end of September. Our calculations also showed that CZWI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare CZWI to other stocks including Nabriva Therapeutics plc (NASDAQ:NBRV), Gevo, Inc. (NASDAQ:GEVO), and Innodata Inc (NASDAQ:INOD) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 S&P 500 ETFs by 66 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 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.

Emanuel Friedman of EJF Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s take a gander at the key hedge fund action regarding Citizens Community Bancorp Inc. (NASDAQ:CZWI).

Hedge fund activity in Citizens Community Bancorp Inc. (NASDAQ:CZWI)

At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 4 hedge funds held shares or bullish call options in CZWI 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.

The largest stake in Citizens Community Bancorp Inc. (NASDAQ:CZWI) was held by Fourthstone LLC, which reported holding $7.7 million worth of stock at the end of September. It was followed by Tontine Asset Management with a $1.8 million position. Other investors bullish on the company included EJF Capital, Millennium Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Fourthstone LLC allocated the biggest weight to Citizens Community Bancorp Inc. (NASDAQ:CZWI), around 6.42% of its 13F portfolio. Tontine Asset Management is also relatively very bullish on the stock, earmarking 0.39 percent of its 13F equity portfolio to CZWI.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s now review hedge fund activity in other stocks similar to Citizens Community Bancorp Inc. (NASDAQ:CZWI). We will take a look at Nabriva Therapeutics plc (NASDAQ:NBRV), Gevo, Inc. (NASDAQ:GEVO), Innodata Inc (NASDAQ:INOD), Aravive, Inc. (NASDAQ:ARAV), Northern Technologies International Corp (NASDAQ:NTIC), iMedia Brands, Inc. (NASDAQ:IMBI), and Computer Task Group, Inc. (NASDAQ:CTG). All of these stocks’ market caps are closest to CZWI’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.1 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $11 million in CZWI’s case. Nabriva Therapeutics plc (NASDAQ:NBRV) is the most popular stock in this table. On the other hand Innodata Inc (NASDAQ:INOD) is the least popular one with only 1 bullish hedge fund positions. Citizens Community Bancorp Inc. (NASDAQ:CZWI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CZWI is 48.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on CZWI as the stock returned 31.2% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.