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Is CMCO A Good Stock To Buy Now?

Reymerlyn Martin
·6 min read

In this article you are going to find out whether hedge funds think Columbus McKinnon Corporation (NASDAQ:CMCO) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is CMCO a good stock to buy now? Columbus McKinnon Corporation (NASDAQ:CMCO) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 17 hedge funds' portfolios at the end of the third quarter of 2020. Our calculations also showed that CMCO 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). 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 ArcBest Corp (NASDAQ:ARCB), Cellectis SA (NASDAQ:CLLS), and 1st Source Corporation (NASDAQ:SRCE) to gather more data points. Video: Watch our video about the top 5 most popular hedge fund stocks.

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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Gavin Saitowitz of Prelude Capital
Gavin Saitowitz of Prelude Capital

Gavin Saitowitz of Prelude Capital

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 15 best blue chip stocks 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. With all of this in mind let's take a glance at the key hedge fund action regarding Columbus McKinnon Corporation (NASDAQ:CMCO).

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

At the end of September, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CMCO over the last 21 quarters. With hedge funds' capital changing hands, there exists a few notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, founded by Jim Simons, holds the largest position in Columbus McKinnon Corporation (NASDAQ:CMCO). Renaissance Technologies has a $8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $4.1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions consist of Steven Baughman's Divisar Capital, Mark Lee's Forest Hill Capital and Charles Paquelet's Skylands Capital. In terms of the portfolio weights assigned to each position Forest Hill Capital allocated the biggest weight to Columbus McKinnon Corporation (NASDAQ:CMCO), around 1.5% of its 13F portfolio. Rutabaga Capital Management is also relatively very bullish on the stock, designating 1.21 percent of its 13F equity portfolio to CMCO.

Since Columbus McKinnon Corporation (NASDAQ:CMCO) has experienced a decline in interest from the smart money, it's safe to say that there were a few money managers that elected to cut their entire stakes in the third quarter. Intriguingly, Peter Algert and Kevin Coldiron's Algert Coldiron Investors dropped the biggest stake of all the hedgies followed by Insider Monkey, worth an estimated $0.3 million in stock, and Roger Ibbotson's Zebra Capital Management was right behind this move, as the fund sold off about $0.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Columbus McKinnon Corporation (NASDAQ:CMCO) but similarly valued. These stocks are ArcBest Corp (NASDAQ:ARCB), Cellectis SA (NASDAQ:CLLS), 1st Source Corporation (NASDAQ:SRCE), RAPT Therapeutics, Inc. (NASDAQ:RAPT), Akouos, Inc. (NASDAQ:AKUS), Gogo Inc (NASDAQ:GOGO), and World Acceptance Corp. (NASDAQ:WRLD). This group of stocks' market values match CMCO's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ARCB,17,66107,5 CLLS,8,20311,-5 SRCE,10,19677,0 RAPT,16,45437,9 AKUS,12,178200,-8 GOGO,14,165265,-4 WRLD,12,137504,0 Average,12.7,90357,-0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.7 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $33 million in CMCO's case. ArcBest Corp (NASDAQ:ARCB) is the most popular stock in this table. On the other hand Cellectis SA (NASDAQ:CLLS) is the least popular one with only 8 bullish hedge fund positions. Columbus McKinnon Corporation (NASDAQ:CMCO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CMCO is 75.4. 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. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on CMCO as the stock returned 22.5% since the end of Q3 (through 12/14) 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.

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