Is Columbus McKinnon Corporation (CMCO) Going To Burn These Hedge Funds ?
We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds' top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. 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 Columbus McKinnon Corporation (NASDAQ:CMCO).
Is Columbus McKinnon Corporation (NASDAQ:CMCO) a splendid investment now? Hedge funds are becoming less hopeful. The number of long hedge fund positions decreased by 1 in recent months. Our calculations also showed that CMCO isn't among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to 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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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 take a glance at the recent hedge fund action regarding Columbus McKinnon Corporation (NASDAQ:CMCO).
What does smart money think about Columbus McKinnon Corporation (NASDAQ:CMCO)?
At Q2's end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CMCO over the last 16 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, Skylands Capital held the most valuable stake in Columbus McKinnon Corporation (NASDAQ:CMCO), which was worth $9 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $8.6 million worth of shares. Moreover, Driehaus Capital, Millennium Management, and Forest Hill Capital were also bullish on Columbus McKinnon Corporation (NASDAQ:CMCO), allocating a large percentage of their portfolios to this stock.
Due to the fact that Columbus McKinnon Corporation (NASDAQ:CMCO) has faced bearish sentiment from the smart money, it's easy to see that there exists a select few hedgies that slashed their entire stakes heading into Q3. At the top of the heap, David Costen Haley's HBK Investments cut the largest stake of the 750 funds monitored by Insider Monkey, totaling close to $0.6 million in stock. David Harding's fund, Winton Capital Management, also sold off its stock, about $0.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 1 funds heading into Q3.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Columbus McKinnon Corporation (NASDAQ:CMCO) but similarly valued. These stocks are Meridian Bancorp, Inc. (NASDAQ:EBSB), Organigram Holdings Inc. (NASDAQ:OGI), Weis Markets, Inc. (NYSE:WMK), and Marten Transport, Ltd (NASDAQ:MRTN). All of these stocks' market caps are similar to CMCO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EBSB,11,83875,-4 OGI,5,9237,5 WMK,13,69855,-2 MRTN,18,43749,1 Average,11.75,51679,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $77 million in CMCO's case. Marten Transport, Ltd (NASDAQ:MRTN) is the most popular stock in this table. On the other hand Organigram Holdings Inc. (NASDAQ:OGI) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Columbus McKinnon Corporation (NASDAQ:CMCO) is more popular among hedge funds. 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. Unfortunately CMCO wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CMCO were disappointed as the stock returned -13.1% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
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