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We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Comerica Incorporated (NYSE:CMA).
Comerica Incorporated (NYSE:CMA) has experienced a decrease in hedge fund interest in recent months. Comerica Incorporated (NYSE:CMA) was in 32 hedge funds' portfolios at the end of March. The all time high for this statistic is 49. Our calculations also showed that CMA isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
If you'd ask most shareholders, hedge funds are seen as unimportant, outdated financial tools of yesteryear. While there are over 8000 funds trading at the moment, Our researchers look at the elite of this club, around 850 funds. These money managers manage most of the smart money's total capital, and by shadowing their first-class equity investments, Insider Monkey has revealed various investment strategies that have historically outstripped the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Clint Carlson of Carlson Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. Keeping this in mind we're going to take a gander at the new hedge fund action surrounding Comerica Incorporated (NYSE:CMA).
Do Hedge Funds Think CMA Is A Good Stock To Buy Now?
At first quarter's end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from the fourth quarter of 2020. On the other hand, there were a total of 33 hedge funds with a bullish position in CMA a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
More specifically, Adage Capital Management was the largest shareholder of Comerica Incorporated (NYSE:CMA), with a stake worth $102.4 million reported as of the end of March. Trailing Adage Capital Management was Basswood Capital, which amassed a stake valued at $87.3 million. D E Shaw, Citadel Investment Group, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Basswood Capital allocated the biggest weight to Comerica Incorporated (NYSE:CMA), around 3.94% of its 13F portfolio. Forest Hill Capital is also relatively very bullish on the stock, setting aside 3.77 percent of its 13F equity portfolio to CMA.
Since Comerica Incorporated (NYSE:CMA) has witnessed a decline in interest from the entirety of the hedge funds we track, logic holds that there was a specific group of fund managers that decided to sell off their full holdings last quarter. It's worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dropped the largest position of the 750 funds monitored by Insider Monkey, comprising close to $61.6 million in stock, and Sander Gerber's Hudson Bay Capital Management was right behind this move, as the fund cut about $5.9 million worth. These moves are interesting, as total hedge fund interest dropped by 6 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Comerica Incorporated (NYSE:CMA) but similarly valued. We will take a look at Floor & Decor Holdings, Inc. (NYSE:FND), Elastic N.V. (NYSE:ESTC), Everest Re Group Ltd (NYSE:RE), Formula One Group (NASDAQ:FWONK), PRA Health Sciences Inc (NASDAQ:PRAH), Gaming and Leisure Properties Inc (NASDAQ:GLPI), and Henry Schein, Inc. (NASDAQ:HSIC). This group of stocks' market values are similar to CMA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FND,38,1100201,7 ESTC,52,1884446,3 RE,32,520803,3 FWONK,37,1672098,-5 PRAH,35,1066188,12 GLPI,28,594880,-5 HSIC,32,1262137,-1 Average,36.3,1157250,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.3 hedge funds with bullish positions and the average amount invested in these stocks was $1157 million. That figure was $704 million in CMA's case. Elastic N.V. (NYSE:ESTC) is the most popular stock in this table. On the other hand Gaming and Leisure Properties Inc (NASDAQ:GLPI) is the least popular one with only 28 bullish hedge fund positions. Comerica Incorporated (NYSE:CMA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CMA is 26.9. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and surpassed the market again by 6 percentage points. Unfortunately CMA wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CMA investors were disappointed as the stock returned 0.9% since the end of March (through 7/2) 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 in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.