While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and optimism towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the first quarter and hedging or reducing many of their long positions. However, as we know, big investors usually buy stocks with strong fundamentals, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Customers Bancorp Inc (NYSE:CUBI).
Customers Bancorp Inc (NYSE:CUBI) was in 13 hedge funds’ portfolios at the end of the first quarter of 2019. CUBI investors should pay attention to a decrease in enthusiasm from smart money lately. There were 15 hedge funds in our database with CUBI positions at the end of the previous quarter. Our calculations also showed that CUBI isn’t among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Let’s analyze the latest hedge fund action regarding Customers Bancorp Inc (NYSE:CUBI).
What have hedge funds been doing with Customers Bancorp Inc (NYSE:CUBI)?
At Q1’s end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in CUBI a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Third Avenue Management was the largest shareholder of Customers Bancorp Inc (NYSE:CUBI), with a stake worth $11.4 million reported as of the end of March. Trailing Third Avenue Management was GLG Partners, which amassed a stake valued at $7.3 million. Newtyn Management, Renaissance Technologies, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
Because Customers Bancorp Inc (NYSE:CUBI) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of hedge funds that elected to cut their entire stakes by the end of the third quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dumped the largest investment of all the hedgies followed by Insider Monkey, totaling an estimated $0.9 million in stock. Minhua Zhang’s fund, Weld Capital Management, also said goodbye to its stock, about $0.4 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 2 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Customers Bancorp Inc (NYSE:CUBI) but similarly valued. These stocks are Pzena Investment Management Inc (NYSE:PZN), One Liberty Properties, Inc. (NYSE:OLP), Puxin Limited (NYSE:NEW), and Nicolet Bankshares Inc. (NASDAQ:NCBS). This group of stocks’ market values are similar to CUBI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PZN | 7 | 16599 | 2 |
| OLP | 4 | 27437 | -1 |
| NEW | 2 | 6163 | -2 |
| NCBS | 3 | 4232 | 0 |
| Average | 4 | 13608 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $40 million in CUBI’s case. Pzena Investment Management Inc (NYSE:PZN) is the most popular stock in this table. On the other hand Puxin Limited (NYSE:NEW) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Customers Bancorp Inc (NYSE:CUBI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on CUBI as the stock returned 11.4% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
