Should I Buy Comerica Incorporated (CMA)?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, 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 Comerica Incorporated (NYSE:CMA).

Comerica Incorporated (NYSE:CMA) was in 33 hedge funds’ portfolios at the end of June. The all time high for this statistic is 49. CMA has seen an increase in activity from the world’s largest hedge funds in recent months. There were 32 hedge funds in our database with CMA holdings at the end of March. Our calculations also showed that CMA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Bruce Kovner of Caxton Associates LP

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s check out the recent hedge fund action surrounding Comerica Incorporated (NYSE:CMA).

Do Hedge Funds Think CMA Is A Good Stock To Buy Now?

At second quarter’s end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CMA over the last 24 quarters. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

More specifically, Adage Capital Management was the largest shareholder of Comerica Incorporated (NYSE:CMA), with a stake worth $85.3 million reported as of the end of June. Trailing Adage Capital Management was Millennium Management, which amassed a stake valued at $63.2 million. Citadel Investment Group, Basswood Capital, and D E Shaw 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 Forest Hill Capital allocated the biggest weight to Comerica Incorporated (NYSE:CMA), around 3.72% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, dishing out 3.51 percent of its 13F equity portfolio to CMA.

As aggregate interest increased, specific money managers were breaking ground themselves. Caxton Associates LP, managed by Bruce Kovner, assembled the most outsized position in Comerica Incorporated (NYSE:CMA). Caxton Associates LP had $1 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also made a $0.6 million investment in the stock during the quarter. The other funds with brand new CMA positions are Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, Karim Abbadi and Edward McBride’s Centiva Capital, and Greg Poole’s Echo Street Capital Management.

Let’s go over hedge fund activity in other stocks similar to Comerica Incorporated (NYSE:CMA). These stocks are Beyond Meat, Inc. (NASDAQ:BYND), DXC Technology Company (NYSE:DXC), Formula One Group (NASDAQ:FWONA), Amdocs Limited (NASDAQ:DOX), NRG Energy Inc (NYSE:NRG), MKS Instruments, Inc. (NASDAQ:MKSI), and AGCO Corporation (NYSE:AGCO). This group of stocks’ market values match CMA’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.9 hedge funds with bullish positions and the average amount invested in these stocks was $697 million. That figure was $547 million in CMA’s case. AGCO Corporation (NYSE:AGCO) is the most popular stock in this table. On the other hand Beyond Meat, Inc. (NASDAQ:BYND) is the least popular one with only 17 bullish hedge fund positions. Comerica Incorporated (NYSE:CMA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CMA is 64.3. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Hedge funds were also right about betting on CMA as the stock returned 17.4% since the end of Q2 (through 10/15) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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