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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 BanColombia S.A. (NYSE:CIB).
Is BanColombia S.A. (NYSE:CIB) the right investment to pursue these days? Money managers were taking a pessimistic view. The number of long hedge fund bets fell by 6 in recent months. BanColombia S.A. (NYSE:CIB) was in 3 hedge funds' portfolios at the end of September. The all time high for this statistics is 14. Our calculations also showed that CIB 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).
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 was 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Bernard Horn of Polaris 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. 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 we're going to take a peek at the latest hedge fund action encompassing BanColombia S.A. (NYSE:CIB).
What have hedge funds been doing with BanColombia S.A. (NYSE:CIB)?
At Q3's end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -67% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in CIB a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in BanColombia S.A. (NYSE:CIB) was held by Polaris Capital Management, which reported holding $59.3 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $1.2 million position. The only other hedge fund that is bullish on the company was Citadel Investment Group.
Judging by the fact that BanColombia S.A. (NYSE:CIB) has faced falling interest from the aggregate hedge fund industry, it's safe to say that there lies a certain "tier" of fund managers that slashed their positions entirely by the end of the third quarter. At the top of the heap, Paul Marshall and Ian Wace's Marshall Wace LLP dropped the largest stake of the "upper crust" of funds tracked by Insider Monkey, worth close to $2.7 million in stock, Renaissance Technologies was right behind this move, as the fund said goodbye to about $1.5 million worth. These moves are interesting, as aggregate hedge fund interest fell by 6 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as BanColombia S.A. (NYSE:CIB) but similarly valued. These stocks are Toll Brothers Inc (NYSE:TOL), WEX Inc (NYSE:WEX), Ciena Corporation (NYSE:CIEN), Arrow Electronics, Inc. (NYSE:ARW), Bruker Corporation (NASDAQ:BRKR), Proofpoint Inc (NASDAQ:PFPT), and Natera Inc (NASDAQ:NTRA). This group of stocks' market values are similar to CIB's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TOL,39,707443,0 WEX,26,288327,2 CIEN,29,157976,-3 ARW,28,651619,-1 BRKR,31,154882,3 PFPT,37,489399,2 NTRA,43,932118,8 Average,33.3,483109,1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.3 hedge funds with bullish positions and the average amount invested in these stocks was $483 million. That figure was $61 million in CIB's case. Natera Inc (NASDAQ:NTRA) is the most popular stock in this table. On the other hand WEX Inc (NYSE:WEX) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks BanColombia S.A. (NYSE:CIB) is even less popular than WEX. Our overall hedge fund sentiment score for CIB is 5.4. 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. Hedge funds clearly dropped the ball on CIB as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on CIB as the stock returned 18.9% since Q3 (through November 23rd) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.