As we already know from media reports and hedge fund investor letters, many hedge funds lost money in fourth quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with technology among them. Nevertheless, most investors decided to stick to their bullish theses and their long-term focus allows us to profit from the recent declines. In particular, let’s take a look at what hedge funds think about Capitol Federal Financial, Inc. (NASDAQ:CFFN) in this article.
Capitol Federal Financial, Inc. (NASDAQ:CFFN) investors should pay attention to a decrease in hedge fund interest of late. CFFN was in 9 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 12 hedge funds in our database with CFFN holdings at the end of the previous quarter. Our calculations also showed that cffn isn't among the 30 most popular stocks among hedge funds.
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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's view the latest hedge fund action regarding Capitol Federal Financial, Inc. (NASDAQ:CFFN).
What have hedge funds been doing with Capitol Federal Financial, Inc. (NASDAQ:CFFN)?
At the end of the fourth quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CFFN over the last 14 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Capitol Federal Financial, Inc. (NASDAQ:CFFN), which was worth $112.7 million at the end of the third quarter. On the second spot was First Pacific Advisors LLC which amassed $11.9 million worth of shares. Moreover, Citadel Investment Group, Arrowstreet Capital, and Dorset Management were also bullish on Capitol Federal Financial, Inc. (NASDAQ:CFFN), allocating a large percentage of their portfolios to this stock.
Due to the fact that Capitol Federal Financial, Inc. (NASDAQ:CFFN) has faced a decline in interest from the smart money, logic holds that there was a specific group of hedgies that decided to sell off their positions entirely heading into Q3. Intriguingly, Ian Simm's Impax Asset Management sold off the biggest investment of all the hedgies tracked by Insider Monkey, totaling an estimated $21.5 million in stock. Israel Englander's fund, Millennium Management, also dumped its stock, about $0.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 3 funds heading into Q3.
Let's also examine hedge fund activity in other stocks similar to Capitol Federal Financial, Inc. (NASDAQ:CFFN). We will take a look at ExlService Holdings, Inc. (NASDAQ:EXLS), Great Western Bancorp Inc (NYSE:GWB), PriceSmart, Inc. (NASDAQ:PSMT), and Bitauto Holdings Limited (NYSE:BITA). This group of stocks' market caps are closest to CFFN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EXLS,11,36147,1 GWB,11,19420,3 PSMT,8,31971,-1 BITA,7,18400,0 Average,9.25,26485,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $161 million in CFFN's case. ExlService Holdings, Inc. (NASDAQ:EXLS) is the most popular stock in this table. On the other hand Bitauto Holdings Limited (NYSE:BITA) is the least popular one with only 7 bullish hedge fund positions. Capitol Federal Financial, Inc. (NASDAQ:CFFN) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately CFFN wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); CFFN investors were disappointed as the stock returned 4.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.