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Chemung Financial Corp. (CHMG): Hedge Funds In Wait-and-See Mode

·6 min read

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 Chemung Financial Corp. (NASDAQ:CHMG) to find out whether there were any major changes in hedge funds' views.

Hedge fund interest in Chemung Financial Corp. (NASDAQ:CHMG) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that CHMG isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Quad/Graphics, Inc. (NYSE:QUAD), OptiNose, Inc. (NASDAQ:OPTN), and Comstock Mining, Inc. (NYSE:LODE) to gather more data points.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Matthew Lindenbaum Basswood Capital
Matthew Lindenbaum Basswood Capital

Matthew Lindenbaum of Basswood Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $26 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. With all of this in mind we're going to review the fresh hedge fund action encompassing Chemung Financial Corp. (NASDAQ:CHMG).

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

Heading into the second quarter of 2021, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 3 hedge funds held shares or bullish call options in CHMG a year ago. With the smart money's capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Matthew Lindenbaum's Basswood Capital has the biggest position in Chemung Financial Corp. (NASDAQ:CHMG), worth close to $4.2 million, accounting for 0.2% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies, which holds a $3.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position Basswood Capital allocated the biggest weight to Chemung Financial Corp. (NASDAQ:CHMG), around 0.19% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to CHMG.

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 Chemung Financial Corp. (NASDAQ:CHMG). These stocks are Quad/Graphics, Inc. (NYSE:QUAD), OptiNose, Inc. (NASDAQ:OPTN), Comstock Mining, Inc. (NYSE:LODE), Annovis Bio, Inc. (NYSE:ANVS), Spark Networks SE (NYSE:LOV), Select Bancorp, Inc. (NASDAQ:SLCT), and Five Star Senior Living Inc. (NASDAQ:FVE). This group of stocks' market values resemble CHMG's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QUAD,10,9438,2 OPTN,10,6714,0 LODE,4,1097,0 ANVS,6,10079,5 LOV,6,44401,-3 SLCT,5,11115,0 FVE,11,27833,0 Average,7.4,15811,0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.4 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $9 million in CHMG's case. Five Star Senior Living Inc. (NASDAQ:FVE) is the most popular stock in this table. On the other hand Comstock Mining, Inc. (NYSE:LODE) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Chemung Financial Corp. (NASDAQ:CHMG) is even less popular than LODE. Our overall hedge fund sentiment score for CHMG is 23. 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 dodged a bullet by taking a bearish stance towards CHMG. Our calculations showed that the top 10 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th but managed to beat the market again by 3.3 percentage points. Unfortunately CHMG wasn't nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); CHMG investors were disappointed as the stock returned 2.8% since the end of the first quarter (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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

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