Is Codorus Valley Bancorp, Inc. (CVLY) A Good Stock To Buy?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Codorus Valley Bancorp, Inc. (NASDAQ:CVLY) to find out whether there were any major changes in hedge funds’ views.

Codorus Valley Bancorp, Inc. (NASDAQ:CVLY) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds’ portfolios at the end of September. Our calculations also showed that CVLY 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 CVLY to other stocks including NACCO Industries, Inc. (NYSE:NC), Evogene Ltd. (NASDAQ:EVGN), and Battalion Oil Corporation (NYSE:BATL) to get a better sense of its popularity.

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

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Paul Isaac of Arbiter Partners Capital Management

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 10 most profitable companies in the world 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. Keeping this in mind let’s take a look at the fresh hedge fund action surrounding Codorus Valley Bancorp, Inc. (NASDAQ:CVLY).

How are hedge funds trading Codorus Valley Bancorp, Inc. (NASDAQ:CVLY)?

At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. By comparison, 5 hedge funds held shares or bullish call options in CVLY a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Phil Stone’s Fourthstone LLC has the largest position in Codorus Valley Bancorp, Inc. (NASDAQ:CVLY), worth close to $8.7 million, amounting to 7.3% of its total 13F portfolio. Sitting at the No. 2 spot is Robert I. Usdan and Wayne K. Goldstein of Endicott Management, with a $3.5 million position; 4.8% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism contain Renaissance Technologies, Paul J. Isaac’s Arbiter Partners Capital Management and . In terms of the portfolio weights assigned to each position Fourthstone LLC allocated the biggest weight to Codorus Valley Bancorp, Inc. (NASDAQ:CVLY), around 7.28% of its 13F portfolio. Endicott Management is also relatively very bullish on the stock, dishing out 4.85 percent of its 13F equity portfolio to CVLY.

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 also examine hedge fund activity in other stocks similar to Codorus Valley Bancorp, Inc. (NASDAQ:CVLY). We will take a look at NACCO Industries, Inc. (NYSE:NC), Evogene Ltd. (NASDAQ:EVGN), Battalion Oil Corporation (NYSE:BATL), Riot Blockchain, Inc (NASDAQ:RIOT), Points International Ltd (NASDAQ:PCOM), Entravision Communications Corporation (NYSE:EVC), and StoneCastle Financial Corp (NASDAQ:BANX). All of these stocks’ market caps are similar to CVLY’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.4 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $14 million in CVLY’s case. Entravision Communications Corporation (NYSE:EVC) is the most popular stock in this table. On the other hand StoneCastle Financial Corp (NASDAQ:BANX) is the least popular one with only 1 bullish hedge fund positions. Codorus Valley Bancorp, Inc. (NASDAQ:CVLY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CVLY is 43.8. 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 CVLY as the stock returned 29.7% 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.