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Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Is BanColombia S.A. (NYSE:CIB) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
BanColombia S.A. (NYSE:CIB) has experienced an increase in support from the world's most elite money managers of late. CIB was in 14 hedge funds' portfolios at the end of the fourth quarter of 2019. There were 11 hedge funds in our database with CIB holdings at the end of the previous quarter. Our calculations also showed that CIB isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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Richard Driehaus of Driehaus Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. With all of this in mind we're going to take a gander at the key hedge fund action regarding BanColombia S.A. (NYSE:CIB).
How have hedgies been trading BanColombia S.A. (NYSE:CIB)?
Heading into the first quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from one quarter earlier. On the other hand, there were a total of 6 hedge funds with a bullish position in CIB a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Bernard Horn's Polaris Capital Management has the biggest position in BanColombia S.A. (NYSE:CIB), worth close to $109.2 million, accounting for 4.5% of its total 13F portfolio. Coming in second is Driehaus Capital, led by Richard Driehaus, holding a $31.4 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Other peers that hold long positions contain Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Renaissance Technologies and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Polaris Capital Management allocated the biggest weight to BanColombia S.A. (NYSE:CIB), around 4.5% of its 13F portfolio. Driehaus Capital is also relatively very bullish on the stock, designating 0.84 percent of its 13F equity portfolio to CIB.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Two Sigma Advisors, managed by John Overdeck and David Siegel, initiated the largest position in BanColombia S.A. (NYSE:CIB). Two Sigma Advisors had $3.5 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also made a $0.9 million investment in the stock during the quarter. The other funds with brand new CIB positions are Ken Griffin's Citadel Investment Group and Donald Sussman's Paloma Partners.
Let's go over hedge fund activity in other stocks similar to BanColombia S.A. (NYSE:CIB). We will take a look at Alliant Energy Corporation (NYSE:LNT), IDEX Corporation (NYSE:IEX), SVB Financial Group (NASDAQ:SIVB), and Franklin Resources, Inc. (NYSE:BEN). This group of stocks' market valuations match CIB's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LNT,28,560221,5 IEX,23,487828,2 SIVB,35,740028,-7 BEN,37,565331,0 Average,30.75,588352,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.75 hedge funds with bullish positions and the average amount invested in these stocks was $588 million. That figure was $214 million in CIB's case. Franklin Resources, Inc. (NYSE:BEN) is the most popular stock in this table. On the other hand IDEX Corporation (NYSE:IEX) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks BanColombia S.A. (NYSE:CIB) is even less popular than IEX. Hedge funds dodged a bullet by taking a bearish stance towards CIB. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately CIB wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CIB investors were disappointed as the stock returned -57.5% during the same time period 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 most of these stocks already outperformed the market so far in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.