Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Coastal Financial Corporation (NASDAQ:CCB).
Coastal Financial Corporation (NASDAQ:CCB) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds' portfolios at the end of the first quarter of 2021. Our calculations also showed that CCB isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare CCB to other stocks including Commercial Vehicle Group, Inc. (NASDAQ:CVGI), Investors Title Company (NASDAQ:ITIC), and TFF Pharmaceuticals, Inc. (NASDAQ:TFFP) to get a better sense of its popularity.
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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Emanuel Friedman of EJF Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $26 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we're going to take a peek at the key hedge fund action encompassing Coastal Financial Corporation (NASDAQ:CCB).
Do Hedge Funds Think CCB Is A Good Stock To Buy Now?
At Q1's end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2020. On the other hand, there were a total of 2 hedge funds with a bullish position in CCB a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Among these funds, EJF Capital held the most valuable stake in Coastal Financial Corporation (NASDAQ:CCB), which was worth $23.1 million at the end of the fourth quarter. On the second spot was Renaissance Technologies which amassed $1.5 million worth of shares. JCSD Capital was 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 EJF Capital allocated the biggest weight to Coastal Financial Corporation (NASDAQ:CCB), around 1.67% of its 13F portfolio. JCSD Capital is also relatively very bullish on the stock, setting aside 0.47 percent of its 13F equity portfolio to CCB.
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 review hedge fund activity in other stocks similar to Coastal Financial Corporation (NASDAQ:CCB). We will take a look at Commercial Vehicle Group, Inc. (NASDAQ:CVGI), Investors Title Company (NASDAQ:ITIC), TFF Pharmaceuticals, Inc. (NASDAQ:TFFP), North American Construction Group Ltd. (NYSE:NOA), CymaBay Therapeutics Inc (NASDAQ:CBAY), WhiteHorse Finance, Inc. (NASDAQ:WHF), and United Insurance Holdings Corp. (NASDAQ:UIHC). This group of stocks' market valuations are closest to CCB's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CVGI,14,72822,-6 ITIC,5,41599,-2 TFFP,17,48807,8 NOA,10,37315,2 CBAY,18,122046,-1 WHF,3,2144,1 UIHC,7,9692,-2 Average,10.6,47775,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.6 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $25 million in CCB's case. CymaBay Therapeutics Inc (NASDAQ:CBAY) is the most popular stock in this table. On the other hand WhiteHorse Finance, Inc. (NASDAQ:WHF) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Coastal Financial Corporation (NASDAQ:CCB) is even less popular than WHF. Our overall hedge fund sentiment score for CCB 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. Hedge funds clearly dropped the ball on CCB as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on CCB as the stock returned 14.2% since Q1 (through June 11th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.