We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds' top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Catchmark Timber Trust Inc (NYSE:CTT).
Catchmark Timber Trust Inc (NYSE:CTT) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 9 hedge funds' portfolios at the end of June. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Caesarstone Ltd. (NASDAQ:CSTE), LAIX Inc. (NYSE:LAIX), and First Community Bankshares, Inc. (NASDAQ:FCBC) to gather more data points. Our calculations also showed that CTT isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, 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 review the key hedge fund action encompassing Catchmark Timber Trust Inc (NYSE:CTT).
What have hedge funds been doing with Catchmark Timber Trust Inc (NYSE:CTT)?
Heading into the third quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CTT over the last 16 quarters. With hedgies' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Catchmark Timber Trust Inc (NYSE:CTT), which was worth $30.4 million at the end of the second quarter. On the second spot was Impax Asset Management which amassed $9.4 million worth of shares. Moreover, Royce & Associates, Millennium Management, and Huber Capital Management were also bullish on Catchmark Timber Trust Inc (NYSE:CTT), allocating a large percentage of their portfolios to this stock.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the second quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's go over hedge fund activity in other stocks similar to Catchmark Timber Trust Inc (NYSE:CTT). We will take a look at Caesarstone Ltd. (NASDAQ:CSTE), LAIX Inc. (NYSE:LAIX), First Community Bankshares, Inc. (NASDAQ:FCBC), and Capitol Investment Corp. IV (NYSE:CIC). This group of stocks' market valuations are closest to CTT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CSTE,9,23923,3 LAIX,2,2144,0 FCBC,3,9257,-1 CIC,18,178758,3 Average,8,53521,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $51 million in CTT's case. Capitol Investment Corp. IV (NYSE:CIC) is the most popular stock in this table. On the other hand LAIX Inc. (NYSE:LAIX) is the least popular one with only 2 bullish hedge fund positions. Catchmark Timber Trust Inc (NYSE:CTT) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on CTT, though not to the same extent, as the stock returned 3.5% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.