The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Customers Bancorp Inc (NASDAQ:CUBI).
Hedge fund interest in Customers Bancorp Inc (NASDAQ:CUBI) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare CUBI to other stocks including National CineMedia, Inc. (NASDAQ:NCMI), Dorchester Minerals LP (NASDAQ:DMLP), and Valhi, Inc. (NYSE:VHI) to get a better sense of its popularity.
Video: Click the image to 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Martin Whitman of Third Avenue Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a gander at the latest hedge fund action encompassing Customers Bancorp Inc (NASDAQ:CUBI).
What does smart money think about Customers Bancorp Inc (NASDAQ:CUBI)?
Heading into the fourth quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CUBI over the last 17 quarters. 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, Newtyn Management was the largest shareholder of Customers Bancorp Inc (NASDAQ:CUBI), with a stake worth $14 million reported as of the end of September. Trailing Newtyn Management was Third Avenue Management, which amassed a stake valued at $11.6 million. Basswood Capital, Millennium Management, and GLG Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Newtyn Management allocated the biggest weight to Customers Bancorp Inc (NASDAQ:CUBI), around 1.32% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, earmarking 1.05 percent of its 13F equity portfolio to CUBI.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was PEAK6 Capital Management).
Let’s now take a look at hedge fund activity in other stocks similar to Customers Bancorp Inc (NASDAQ:CUBI). We will take a look at National CineMedia, Inc. (NASDAQ:NCMI), Dorchester Minerals LP (NASDAQ:DMLP), Valhi, Inc. (NYSE:VHI), and DMC Global Inc. (NASDAQ:BOOM). This group of stocks’ market valuations are closest to CUBI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NCMI | 17 | 52383 | 1 |
| DMLP | 7 | 40449 | 0 |
| VHI | 6 | 4788 | 0 |
| BOOM | 22 | 92343 | 2 |
| Average | 13 | 47491 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $48 million in CUBI’s case. DMC Global Inc. (NASDAQ:BOOM) is the most popular stock in this table. On the other hand Valhi, Inc. (NYSE:VHI) is the least popular one with only 6 bullish hedge fund positions. Customers Bancorp Inc (NASDAQ:CUBI) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on CUBI as the stock returned 12.7% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
