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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 Cherry Hill Mortgage Investment Corp (NYSE:CHMI).
Cherry Hill Mortgage Investment Corp (NYSE:CHMI) has seen a decrease in hedge fund sentiment recently. Cherry Hill Mortgage Investment Corp (NYSE:CHMI) was in 4 hedge funds' portfolios at the end of March. The all time high for this statistic is 10. There were 7 hedge funds in our database with CHMI holdings at the end of December. Our calculations also showed that CHMI isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the financial world there are numerous metrics market participants have at their disposal to grade their stock investments. A couple of the best metrics are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the best fund managers can outpace the S&P 500 by a superb margin (see the details here). 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 .
Michael Gelband of ExodusPoint Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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 view the key hedge fund action encompassing Cherry Hill Mortgage Investment Corp (NYSE:CHMI).
Do Hedge Funds Think CHMI Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -43% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in CHMI a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the number one position in Cherry Hill Mortgage Investment Corp (NYSE:CHMI), worth close to $8.4 million, corresponding to less than 0.1%% of its total 13F portfolio. Coming in second is Two Sigma Advisors, led by John Overdeck and David Siegel, holding a $2.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism include Michael Gelband's ExodusPoint Capital, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and . In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Cherry Hill Mortgage Investment Corp (NYSE:CHMI), around 0.01% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to CHMI.
Seeing as Cherry Hill Mortgage Investment Corp (NYSE:CHMI) has witnessed bearish sentiment from the smart money, we can see that there is a sect of fund managers that elected to cut their positions entirely by the end of the first quarter. Intriguingly, Warren Lammert's Granite Point Capital dropped the biggest position of the 750 funds monitored by Insider Monkey, comprising about $1.3 million in stock, and David Harding's Winton Capital Management was right behind this move, as the fund cut about $0.7 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 3 funds by the end of the first quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Cherry Hill Mortgage Investment Corp (NYSE:CHMI) but similarly valued. These stocks are Fennec Pharmaceuticals Inc. (NASDAQ:FENC), Bank7 Corp. (NASDAQ:BSVN), First Savings Financial Group, Inc. (NASDAQ:FSFG), Palatin Technologies, Inc. (NYSE:PTN), GSI Technology, Inc. (NASDAQ:GSIT), OP Bancorp (NASDAQ:OPBK), and Catalyst Biosciences Inc (NASDAQ:CBIO). This group of stocks' market caps are closest to CHMI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FENC,6,62743,0 BSVN,2,789,0 FSFG,3,3568,1 PTN,2,192,-4 GSIT,5,17753,1 OPBK,6,12290,2 CBIO,16,65034,1 Average,5.7,23196,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.7 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $11 million in CHMI's case. Catalyst Biosciences Inc (NASDAQ:CBIO) is the most popular stock in this table. On the other hand Bank7 Corp. (NASDAQ:BSVN) is the least popular one with only 2 bullish hedge fund positions. Cherry Hill Mortgage Investment Corp (NYSE:CHMI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CHMI is 21.1. 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 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on CHMI as the stock returned 11.9% since the end of the first quarter (through 6/11) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.