Hedge Funds Souring On Camden National Corporation (CAC)
The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Camden National Corporation (NASDAQ:CAC) and determine whether the smart money was really smart about this stock.
Camden National Corporation (NASDAQ:CAC) has experienced a decrease in support from the world's most elite money managers recently. CAC was in 10 hedge funds' portfolios at the end of March. There were 13 hedge funds in our database with CAC holdings at the end of the previous quarter. Our calculations also showed that CAC isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 58 percentage points since March 2017 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_365194" align="aligncenter" width="400"]
David E. Shaw of D.E. Shaw[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to view the fresh hedge fund action regarding Camden National Corporation (NASDAQ:CAC).
How are hedge funds trading Camden National Corporation (NASDAQ:CAC)?
Heading into the second quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -23% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CAC over the last 18 quarters. With the smart money's sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Camden National Corporation (NASDAQ:CAC), with a stake worth $14.8 million reported as of the end of September. Trailing Renaissance Technologies was Royce & Associates, which amassed a stake valued at $13.6 million. Basswood Capital, Minerva Advisors, and Winton Capital 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 Minerva Advisors allocated the biggest weight to Camden National Corporation (NASDAQ:CAC), around 3.43% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, designating 0.91 percent of its 13F equity portfolio to CAC.
Since Camden National Corporation (NASDAQ:CAC) has faced declining sentiment from the entirety of the hedge funds we track, it's safe to say that there was a specific group of funds that decided to sell off their positions entirely heading into Q4. Intriguingly, Israel Englander's Millennium Management sold off the largest stake of the "upper crust" of funds watched by Insider Monkey, worth about $3 million in stock, and D. E. Shaw's D E Shaw was right behind this move, as the fund dumped about $0.4 million worth. These moves are interesting, as aggregate hedge fund interest fell by 3 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Camden National Corporation (NASDAQ:CAC) but similarly valued. These stocks are Mercer International Inc. (NASDAQ:MERC), Origin Bancorp, Inc. (NASDAQ:OBNK), Dine Brands Global, Inc. (NYSE:DIN), and M/I Homes Inc (NYSE:MHO). This group of stocks' market values are similar to CAC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MERC,10,84956,-4 OBNK,5,10774,-3 DIN,21,71501,1 MHO,16,46205,-4 Average,13,53359,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $53 million. That figure was $44 million in CAC's case. Dine Brands Global, Inc. (NYSE:DIN) is the most popular stock in this table. On the other hand Origin Bancorp, Inc. (NASDAQ:OBNK) is the least popular one with only 5 bullish hedge fund positions. Camden National Corporation (NASDAQ:CAC) is not the least popular stock in this group but hedge fund interest is still below average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately CAC wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CAC investors were disappointed as the stock returned 11% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
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