At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
CapStar Financial Holdings, Inc. (NASDAQ:CSTR) has experienced a decrease in support from the world's most elite money managers recently. Our calculations also showed that CSTR 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Now we're going to take a look at the key hedge fund action encompassing CapStar Financial Holdings, Inc. (NASDAQ:CSTR).
How have hedgies been trading CapStar Financial Holdings, Inc. (NASDAQ:CSTR)?
At the end of the second quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CSTR over the last 16 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Corsair Capital LLC, managed by D.T. Ignacio Jayanti, holds the biggest position in CapStar Financial Holdings, Inc. (NASDAQ:CSTR). Corsair Capital LLC has a $10.1 million position in the stock, comprising 15.9% of its 13F portfolio. The second most bullish fund manager is Fred Cummings of Elizabeth Park Capital Management, with a $5.2 million position; the fund has 2.1% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish encompass Renaissance Technologies, and Joe Huber's Huber Capital Management.
Because CapStar Financial Holdings, Inc. (NASDAQ:CSTR) has faced falling interest from the aggregate hedge fund industry, it's safe to say that there lies a certain "tier" of hedge funds that elected to cut their positions entirely last quarter. Intriguingly, Israel Englander's Millennium Management cut the biggest investment of all the hedgies watched by Insider Monkey, valued at close to $0.3 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also sold off its stock, about $0 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 2 funds last quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as CapStar Financial Holdings, Inc. (NASDAQ:CSTR) but similarly valued. These stocks are Atlantic Power Corp (NYSE:AT), Provident Bancorp, Inc. (NASDAQ:PVBC), Pioneer Floating Rate Trust (NYSE:PHD), and Constellation Pharmaceuticals, Inc. (NASDAQ:CNST). This group of stocks' market values resemble CSTR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AT,12,30039,0 PVBC,2,8356,0 PHD,3,20405,-1 CNST,8,54621,0 Average,6.25,28355,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $18 million in CSTR's case. Atlantic Power Corp (NYSE:AT) is the most popular stock in this table. On the other hand Provident Bancorp, Inc. (NASDAQ:PVBC) is the least popular one with only 2 bullish hedge fund positions. CapStar Financial Holdings, Inc. (NASDAQ:CSTR) 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 CSTR as the stock returned 9.8% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.