Where Do Hedge Funds Stand On CIM Commercial Trust Corporation (CMCT)?

Asma UL Husna
·6 min read

In this article we will analyze whether CIM Commercial Trust Corporation (NASDAQ:CMCT) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

CIM Commercial Trust Corporation (NASDAQ:CMCT) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds' portfolios at the end of the third quarter of 2020. Our calculations also showed that CMCT 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). At the end of this article we will also compare CMCT to other stocks including Coastal Financial Corporation (NASDAQ:CCB), Tuniu Corporation (NASDAQ:TOUR), and Mid Penn Bancorp, Inc. (NASDAQ:MPB) to get a better sense of its popularity. Video: Watch our video about the top 5 most popular hedge fund stocks.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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.

Arnaud Ajdler Engine Capital
Arnaud Ajdler Engine Capital

Arnaud Ajdler of Engine 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. Keeping this in mind let's analyze the recent hedge fund action regarding CIM Commercial Trust Corporation (NASDAQ:CMCT).

Hedge fund activity in CIM Commercial Trust Corporation (NASDAQ:CMCT)

At Q3's end, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2020. On the other hand, there were a total of 2 hedge funds with a bullish position in CMCT a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Engine Capital, managed by Arnaud Ajdler, holds the biggest position in CIM Commercial Trust Corporation (NASDAQ:CMCT). Engine Capital has a $9 million position in the stock, comprising 4.5% of its 13F portfolio. Coming in second is Millennium Management, led by Israel Englander, holding a $1.6 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish encompass Frederick DiSanto's Ancora Advisors, D. E. Shaw's D E Shaw and . In terms of the portfolio weights assigned to each position Engine Capital allocated the biggest weight to CIM Commercial Trust Corporation (NASDAQ:CMCT), around 4.53% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to CMCT.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Zebra Capital Management. 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 Millennium Management).

Let's also examine hedge fund activity in other stocks similar to CIM Commercial Trust Corporation (NASDAQ:CMCT). These stocks are Coastal Financial Corporation (NASDAQ:CCB), Tuniu Corporation (NASDAQ:TOUR), Mid Penn Bancorp, Inc. (NASDAQ:MPB), Emerald Holding, Inc. (NYSE:EEX), Monroe Capital Corp (NASDAQ:MRCC), Lincoln Educational Services Corporation (NASDAQ:LINC), and comScore, Inc. (NASDAQ:SCOR). This group of stocks' market values are closest to CMCT's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CCB,2,12266,0 TOUR,2,9175,0 MPB,3,3094,-1 EEX,6,1661,-2 MRCC,4,2335,0 LINC,11,44606,6 SCOR,13,37592,-2 Average,5.9,15818,0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.9 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $11 million in CMCT's case. comScore, Inc. (NASDAQ:SCOR) is the most popular stock in this table. On the other hand Coastal Financial Corporation (NASDAQ:CCB) is the least popular one with only 2 bullish hedge fund positions. CIM Commercial Trust Corporation (NASDAQ:CMCT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CMCT is 31.2. 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 beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on CMCT, though not to the same extent, as the stock returned 9.4% since the end of Q3 (through November 27th) and outperformed the market.

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Disclosure: None. This article was originally published at Insider Monkey.

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