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In this article we will check out the progression of hedge fund sentiment towards Chemung Financial Corp. (NASDAQ:CHMG) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Hedge fund interest in Chemung Financial Corp. (NASDAQ:CHMG) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that CHMG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). 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 Exterran Corporation (NYSE:EXTN), Synchronoss Technologies, Inc. (NASDAQ:SNCR), and Shore Bancshares, Inc. (NASDAQ:SHBI) to gather more data points.
Video: 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 a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Matthew Lindenbaum of Basswood Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let's take a gander at the key hedge fund action regarding Chemung Financial Corp. (NASDAQ:CHMG).
What does smart money think about Chemung Financial Corp. (NASDAQ:CHMG)?
At the end of September, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2020. On the other hand, there were a total of 3 hedge funds with a bullish position in CHMG a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Chemung Financial Corp. (NASDAQ:CHMG) was held by Basswood Capital, which reported holding $4.4 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $2.1 million position. The only other hedge fund that is bullish on the company was Royce & Associates.
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 third 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 now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Chemung Financial Corp. (NASDAQ:CHMG) but similarly valued. We will take a look at Exterran Corporation (NYSE:EXTN), Synchronoss Technologies, Inc. (NASDAQ:SNCR), Shore Bancshares, Inc. (NASDAQ:SHBI), Surgalign Holdings, Inc. (NASDAQ:SRGA), Strongbridge Biopharma plc (NASDAQ:SBBP), Tanzanian Gold Corporation (NYSE:TRX), and Fonar Corporation (NASDAQ:FONR). This group of stocks' market valuations match CHMG's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EXTN,11,7114,-3 SNCR,10,6587,0 SHBI,5,19132,-1 SRGA,13,10994,2 SBBP,13,32202,3 TRX,2,189,0 FONR,4,10926,-2 Average,8.3,12449,-0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.3 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $7 million in CHMG's case. Surgalign Holdings, Inc. (NASDAQ:SRGA) is the most popular stock in this table. On the other hand Tanzanian Gold Corporation (NYSE:TRX) is the least popular one with only 2 bullish hedge fund positions. Chemung Financial Corp. (NASDAQ:CHMG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CHMG is 27.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on CHMG as the stock returned 17.7% since the end of the third quarter (through 11/23) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.