Hedge funds are known to underperform the bull markets but that's not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Index returned approximately 20% in the first 9 months of this year through September 30th (including dividend payments). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 24% during the same 9-month period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds' consensus stock picks rather than directly investing in hedge funds. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Columbia Banking System Inc (NASDAQ:COLB).
Is Columbia Banking System Inc (NASDAQ:COLB) a safe investment today? The smart money is turning less bullish. The number of long hedge fund bets dropped by 1 lately. Our calculations also showed that COLB isn't among the 30 most popular stocks among hedge funds (view the video below). COLB was in 7 hedge funds' portfolios at the end of June. There were 8 hedge funds in our database with COLB positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most shareholders, hedge funds are perceived as slow, outdated investment tools of years past. While there are more than 8000 funds trading at the moment, We choose to focus on the leaders of this group, about 750 funds. These money managers preside over the lion's share of the hedge fund industry's total capital, and by observing their first-class investments, Insider Monkey has revealed a number of investment strategies that have historically exceeded Mr. Market. Insider Monkey's flagship hedge fund strategy outstripped the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to analyze the recent hedge fund action surrounding Columbia Banking System Inc (NASDAQ:COLB).
Hedge fund activity in Columbia Banking System Inc (NASDAQ:COLB)
At the end of the second quarter, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in COLB a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Columbia Banking System Inc (NASDAQ:COLB) was held by Cardinal Capital, which reported holding $94.7 million worth of stock at the end of March. It was followed by Millennium Management with a $8 million position. Other investors bullish on the company included Citadel Investment Group, Fisher Asset Management, and AlphaOne Capital Partners.
Seeing as Columbia Banking System Inc (NASDAQ:COLB) has faced a decline in interest from the entirety of the hedge funds we track, it's easy to see that there exists a select few fund managers who sold off their positions entirely by the end of the second quarter. It's worth mentioning that Ken Griffin's Citadel Investment Group said goodbye to the largest investment of the 750 funds tracked by Insider Monkey, comprising about $1 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund cut about $0.5 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 1 funds by the end of the second quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Columbia Banking System Inc (NASDAQ:COLB) but similarly valued. These stocks are Pampa Energia S.A. (NYSE:PAM), Avis Budget Group Inc. (NASDAQ:CAR), AAON, Inc. (NASDAQ:AAON), and Shake Shack Inc (NYSE:SHAK). This group of stocks' market caps resemble COLB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PAM,12,307774,-9 CAR,21,1045588,-7 AAON,6,6146,1 SHAK,27,440287,8 Average,16.5,449949,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $450 million. That figure was $113 million in COLB's case. Shake Shack Inc (NYSE:SHAK) is the most popular stock in this table. On the other hand AAON, Inc. (NASDAQ:AAON) is the least popular one with only 6 bullish hedge fund positions. Columbia Banking System Inc (NASDAQ:COLB) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on COLB, though not to the same extent, as the stock returned 2.8% during the third quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
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