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While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding City Holding Company (NASDAQ:CHCO).
City Holding Company (NASDAQ:CHCO) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds' portfolios at the end of September. Our calculations also showed that CHCO 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 NetGear, Inc. (NASDAQ:NTGR), Pitney Bowes Inc. (NYSE:PBI), and Enanta Pharmaceuticals Inc (NASDAQ:ENTA) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Paul Tudor Jones of Tudor Investment Corp
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 15 best blue chip stocks 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. Keeping this in mind we're going to take a look at the key hedge fund action regarding City Holding Company (NASDAQ:CHCO).
What have hedge funds been doing with City Holding Company (NASDAQ:CHCO)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CHCO over the last 21 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in City Holding Company (NASDAQ:CHCO), which was worth $3.6 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $1 million worth of shares. Tudor Investment Corp, Millennium Management, and Polaris 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 Royce & Associates allocated the biggest weight to City Holding Company (NASDAQ:CHCO), around 0.04% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, earmarking 0.04 percent of its 13F equity portfolio to CHCO.
Since City Holding Company (NASDAQ:CHCO) has faced declining sentiment from hedge fund managers, it's easy to see that there is a sect of fund managers that elected to cut their entire stakes in the third quarter. It's worth mentioning that Dmitry Balyasny's Balyasny Asset Management said goodbye to the biggest investment of all the hedgies tracked by Insider Monkey, worth about $0.7 million in stock, and Renaissance Technologies was right behind this move, as the fund dropped about $0.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as City Holding Company (NASDAQ:CHCO) but similarly valued. We will take a look at NetGear, Inc. (NASDAQ:NTGR), Pitney Bowes Inc. (NYSE:PBI), Enanta Pharmaceuticals Inc (NASDAQ:ENTA), Banco Macro SA (NYSE:BMA), nLIGHT, Inc. (NASDAQ:LASR), Teekay LNG Partners L.P. (NYSE:TGP), and Crestwood Equity Partners LP (NYSE:CEQP). This group of stocks' market caps match CHCO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NTGR,20,65372,1 PBI,23,111860,12 ENTA,20,186651,0 BMA,9,52055,-2 LASR,13,56683,1 TGP,10,33043,0 CEQP,2,2370,-2 Average,13.9,72576,1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.9 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $6 million in CHCO's case. Pitney Bowes Inc. (NYSE:PBI) is the most popular stock in this table. On the other hand Crestwood Equity Partners LP (NYSE:CEQP) is the least popular one with only 2 bullish hedge fund positions. City Holding Company (NASDAQ:CHCO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CHCO is 28.4. 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 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on CHCO as the stock returned 18.3% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.