Is CBTX, Inc. (NASDAQ:CBTX) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is CBTX a good stock to buy now? Hedge fund interest in CBTX, Inc. (NASDAQ:CBTX) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that CBTX 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 Amryt Pharma plc (NASDAQ:AMYT), REX American Resources Corp (NYSE:REX), and Laird Superfood, Inc. (NYSE:LSF) 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.
AQR CAPITAL MANAGEMENT
Cliff Asness of AQR Capital Management
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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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. Now let's take a look at the key hedge fund action surrounding CBTX, Inc. (NASDAQ:CBTX).
How have hedgies been trading CBTX, Inc. (NASDAQ:CBTX)?
At Q3's end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 7 hedge funds held shares or bullish call options in CBTX a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in CBTX, Inc. (NASDAQ:CBTX), which was worth $3.3 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $1.9 million worth of shares. Citadel Investment Group, D E Shaw, and Winton 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 Winton Capital Management allocated the biggest weight to CBTX, Inc. (NASDAQ:CBTX), around 0.04% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.0033 percent of its 13F equity portfolio to CBTX.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Engineers Gate Manager. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was AQR Capital Management).
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as CBTX, Inc. (NASDAQ:CBTX) but similarly valued. We will take a look at Amryt Pharma plc (NASDAQ:AMYT), REX American Resources Corp (NYSE:REX), Laird Superfood, Inc. (NYSE:LSF), Diamond Hill Investment Group, Inc. (NASDAQ:DHIL), BeyondSpring, Inc. (NASDAQ:BYSI), Sierra Wireless, Inc. (NASDAQ:SWIR), and Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL). This group of stocks' market caps are similar to CBTX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMYT,4,24862,4 REX,11,38427,2 LSF,12,37444,12 DHIL,9,42666,-1 BYSI,4,2153,-1 SWIR,7,101606,0 RIGL,20,79795,2 Average,9.6,46708,2.6 [/table]
As you can see these stocks had an average of 9.6 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $11 million in CBTX's case. Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) is the most popular stock in this table. On the other hand Amryt Pharma plc (NASDAQ:AMYT) is the least popular one with only 4 bullish hedge fund positions. CBTX, Inc. (NASDAQ:CBTX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CBTX is 41.5. 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on CBTX as the stock returned 40.8% since the end of the third quarter (through 12/2) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
