There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don't cover. Because of Carl Icahn and other elite funds' exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze BanColombia S.A. (NYSE:CIB).
BanColombia S.A. (NYSE:CIB) investors should pay attention to an increase in enthusiasm from smart money in recent months. CIB was in 11 hedge funds' portfolios at the end of the first quarter of 2019. There were 6 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.
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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to analyze the latest hedge fund action encompassing BanColombia S.A. (NYSE:CIB).
How have hedgies been trading BanColombia S.A. (NYSE:CIB)?
Heading into the second quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 83% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in CIB over the last 15 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Bernard Horn's Polaris Capital Management has the largest position in BanColombia S.A. (NYSE:CIB), worth close to $99.8 million, amounting to 4.1% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies, managed by Jim Simons, which holds a $19.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish contain Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Israel Englander's Millennium Management and William B. Gray's Orbis Investment Management.
As industrywide interest jumped, some big names have jumped into BanColombia S.A. (NYSE:CIB) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the biggest position in BanColombia S.A. (NYSE:CIB). Arrowstreet Capital had $14.2 million invested in the company at the end of the quarter. Richard Driehaus's Driehaus Capital also initiated a $3.4 million position during the quarter. The other funds with brand new CIB positions are Ken Griffin's Citadel Investment Group, Mike Vranos's Ellington, and Minhua Zhang's Weld Capital Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as BanColombia S.A. (NYSE:CIB) but similarly valued. These stocks are Advance Auto Parts, Inc. (NYSE:AAP), Universal Health Services, Inc. (NYSE:UHS), Quest Diagnostics Incorporated (NYSE:DGX), and Atmos Energy Corporation (NYSE:ATO). This group of stocks' market caps match CIB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AAP,47,2297068,-4 UHS,29,761401,1 DGX,22,303617,-4 ATO,20,292201,-5 Average,29.5,913572,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $914 million. That figure was $154 million in CIB's case. Advance Auto Parts, Inc. (NYSE:AAP) is the most popular stock in this table. On the other hand Atmos Energy Corporation (NYSE:ATO) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks BanColombia S.A. (NYSE:CIB) is even less popular than ATO. 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 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 0.1% during the same time frame 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 13 of these stocks already outperformed the market so far in the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.