Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won't accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Columbia Financial, Inc. (NASDAQ:CLBK) was in 12 hedge funds' portfolios at the end of June. CLBK investors should pay attention to an increase in hedge fund interest in recent months. There were 8 hedge funds in our database with CLBK holdings at the end of the previous quarter. Our calculations also showed that CLBK 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. Let's take a look at the key hedge fund action regarding Columbia Financial, Inc. (NASDAQ:CLBK).
What does smart money think about Columbia Financial, Inc. (NASDAQ:CLBK)?
At Q2's end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in CLBK over the last 16 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
[caption id="attachment_758440" align="aligncenter" width="450"] Michael Price of MFP Investors[/caption]
More specifically, Ancora Advisors was the largest shareholder of Columbia Financial, Inc. (NASDAQ:CLBK), with a stake worth $12.9 million reported as of the end of March. Trailing Ancora Advisors was Seidman Investment Partnership, which amassed a stake valued at $8.2 million. MFP Investors, Renaissance Technologies, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, key money managers were leading the bulls' herd. Renaissance Technologies, created the most outsized position in Columbia Financial, Inc. (NASDAQ:CLBK). Renaissance Technologies had $2 million invested in the company at the end of the quarter. Peter Muller's PDT Partners also initiated a $0.3 million position during the quarter. The other funds with brand new CLBK positions are Michael Gelband's ExodusPoint Capital and D. E. Shaw's D E Shaw.
Let's check out hedge fund activity in other stocks similar to Columbia Financial, Inc. (NASDAQ:CLBK). We will take a look at Bandwidth Inc. (NASDAQ:BAND), Chesapeake Lodging Trust (NYSE:CHSP), Hope Bancorp, Inc. (NASDAQ:HOPE), and Installed Building Products Inc (NYSE:IBP). All of these stocks' market caps resemble CLBK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BAND,18,184105,-5 CHSP,11,34294,-1 HOPE,15,65791,1 IBP,13,213470,0 Average,14.25,124415,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $33 million in CLBK's case. Bandwidth Inc. (NASDAQ:BAND) is the most popular stock in this table. On the other hand Chesapeake Lodging Trust (NYSE:CHSP) is the least popular one with only 11 bullish hedge fund positions. Columbia Financial, Inc. (NASDAQ:CLBK) 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 CLBK, though not to the same extent, as the stock returned 4.6% during the third quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.