How do we determine whether Canadian Imperial Bank of Commerce (NYSE:CM) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is Canadian Imperial Bank of Commerce (NYSE:CM) the right investment to pursue these days? Money managers are reducing their bets on the stock. The number of long hedge fund bets decreased by 3 lately. Our calculations also showed that CM isn't among the 30 most popular stocks among hedge funds. CM was in 12 hedge funds' portfolios at the end of June. There were 15 hedge funds in our database with CM positions at the end of the previous quarter.
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.
[caption id="attachment_745225" align="aligncenter" width="473"] Noam Gottesman, GLG Partners[/caption]
Unlike some fund managers who are betting on Dow reaching 40000 in a year, 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 glance at the key hedge fund action regarding Canadian Imperial Bank of Commerce (NYSE:CM).
What does smart money think about Canadian Imperial Bank of Commerce (NYSE:CM)?
At Q2's end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CM 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.
More specifically, Renaissance Technologies was the largest shareholder of Canadian Imperial Bank of Commerce (NYSE:CM), with a stake worth $94.1 million reported as of the end of March. Trailing Renaissance Technologies was GLG Partners, which amassed a stake valued at $23.2 million. Citadel Investment Group, D E Shaw, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as Canadian Imperial Bank of Commerce (NYSE:CM) has experienced declining sentiment from the aggregate hedge fund industry, it's safe to say that there were a few funds who were dropping their entire stakes in the second quarter. Intriguingly, Cliff Asness's AQR Capital Management dropped the biggest stake of all the hedgies followed by Insider Monkey, comprising about $142.1 million in stock, and Michael Platt and William Reeves's BlueCrest Capital Mgmt. was right behind this move, as the fund dropped about $1.5 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 3 funds in the second quarter.
Let's also examine hedge fund activity in other stocks similar to Canadian Imperial Bank of Commerce (NYSE:CM). We will take a look at Monster Beverage Corporation (NASDAQ:MNST), Humana Inc (NYSE:HUM), eBay Inc (NASDAQ:EBAY), and Regeneron Pharmaceuticals Inc (NASDAQ:REGN). This group of stocks' market caps resemble CM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MNST,38,2929071,5 HUM,62,4261860,20 EBAY,47,3898481,-1 REGN,37,1330987,6 Average,46,3105100,7.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 46 hedge funds with bullish positions and the average amount invested in these stocks was $3105 million. That figure was $211 million in CM's case. Humana Inc (NYSE:HUM) is the most popular stock in this table. On the other hand Regeneron Pharmaceuticals Inc (NASDAQ:REGN) is the least popular one with only 37 bullish hedge fund positions. Compared to these stocks Canadian Imperial Bank of Commerce (NYSE:CM) is even less popular than REGN. Hedge funds clearly dropped the ball on CM as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks (see the video below) 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 CM as the stock returned 6.5% during the third quarter and outperformed the market by an even larger margin. 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.