Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Community Trust Bancorp, Inc. (NASDAQ: CTBI ) has experienced a decrease in hedge fund sentiment of late. Our calculations also showed that CTBI isn't among the 30 most popular stocks among hedge funds .
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 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 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.
We're going to take a look at the new hedge fund action regarding Community Trust Bancorp, Inc. (NASDAQ: CTBI ).
How have hedgies been trading Community Trust Bancorp, Inc. (NASDAQ:CTBI)?
Heading into the first quarter of 2019, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in CTBI a year ago. So, let's review 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 Community Trust Bancorp, Inc. (NASDAQ:CTBI), which was worth $11.3 million at the end of the fourth quarter. On the second spot was AQR Capital Management which amassed $2.4 million worth of shares. Moreover, Millennium Management, Two Sigma Advisors, and Citadel Investment Group were also bullish on Community Trust Bancorp, Inc. (NASDAQ:CTBI), allocating a large percentage of their portfolios to this stock.
Due to the fact that Community Trust Bancorp, Inc. (NASDAQ:CTBI) has experienced declining sentiment from the smart money, we can see that there were a few fund managers that elected to cut their positions entirely last quarter. At the top of the heap, Roger Ibbotson's Zebra Capital Management sold off the biggest stake of the 700 funds monitored by Insider Monkey, totaling about $0.3 million in stock, and Michael Platt and William Reeves's BlueCrest Capital Mgmt. was right behind this move, as the fund sold off about $0.2 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 2 funds last quarter.
Let's go over hedge fund activity in other stocks similar to Community Trust Bancorp, Inc. (NASDAQ:CTBI). We will take a look at American Outdoor Brands Corporation (NASDAQ: AOBC ), FARO Technologies, Inc. (NASDAQ: FARO ), SunPower Corporation (NASDAQ: SPWR ), and Jianpu Technology Inc. (NYSE: JT ). This group of stocks' market values are closest to CTBI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AOBC,14,109405,-5 FARO,8,38980,-4 SPWR,8,24056,-2 JT,5,27860,1 Average,8.75,50075,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $50 million. That figure was $16 million in CTBI's case. American Outdoor Brands Corporation (NASDAQ: AOBC ) is the most popular stock in this table. On the other hand Jianpu Technology Inc. (NYSE: JT ) is the least popular one with only 5 bullish hedge fund positions. Community Trust Bancorp, Inc. (NASDAQ:CTBI) 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 CTBI wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); CTBI investors were disappointed as the stock returned 4.3% 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 .