Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Cadence Bancorporation (NYSE:CADE) to find out whether there were any major changes in hedge funds’ views.
Cadence Bancorporation (NYSE:CADE) has experienced a decrease in enthusiasm from smart money in recent months. Cadence Bancorporation (NYSE:CADE) was in 25 hedge funds’ portfolios at the end of June. The all time high for this statistic is 29. There were 27 hedge funds in our database with CADE positions at the end of the first quarter. Our calculations also showed that CADE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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David Siegel of Two Sigma Advisors
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Do Hedge Funds Think CADE Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in CADE a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Cadence Bancorporation (NYSE:CADE) was held by Diamond Hill Capital, which reported holding $42.5 million worth of stock at the end of June. It was followed by Two Sigma Advisors with a $20.7 million position. Other investors bullish on the company included Forest Hill Capital, Arrowstreet Capital, and Alpine Associates. In terms of the portfolio weights assigned to each position Forest Hill Capital allocated the biggest weight to Cadence Bancorporation (NYSE:CADE), around 5.33% of its 13F portfolio. Global Frontier Investments is also relatively very bullish on the stock, dishing out 3.94 percent of its 13F equity portfolio to CADE.
Because Cadence Bancorporation (NYSE:CADE) has witnessed bearish sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of hedge funds that elected to cut their positions entirely heading into Q3. At the top of the heap, Fred Cummings’s Elizabeth Park Capital Management cut the largest position of the “upper crust” of funds watched by Insider Monkey, totaling an estimated $9.5 million in stock, and Matthew Halbower’s Pentwater Capital Management was right behind this move, as the fund dumped about $6.7 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 2 funds heading into Q3.
Let’s go over hedge fund activity in other stocks similar to Cadence Bancorporation (NYSE:CADE). These stocks are JELD-WEN Holding, Inc. (NYSE:JELD), First Interstate Bancsystem Inc (NASDAQ:FIBK), Mednax Inc. (NYSE:MD), Prestige Consumer Healthcare Inc. (NYSE:PBH), Barnes Group Inc. (NYSE:B), Golub Capital BDC Inc (NASDAQ:GBDC), and Telephone & Data Systems, Inc. (NYSE:TDS). This group of stocks’ market values are closest to CADE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JELD | 23 | 274466 | -4 |
| FIBK | 12 | 24090 | -2 |
| MD | 19 | 346888 | 8 |
| PBH | 13 | 108805 | -1 |
| B | 12 | 42332 | -6 |
| GBDC | 16 | 70331 | 1 |
| TDS | 18 | 160567 | -2 |
| Average | 16.1 | 146783 | -0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.1 hedge funds with bullish positions and the average amount invested in these stocks was $147 million. That figure was $161 million in CADE’s case. JELD-WEN Holding, Inc. (NYSE:JELD) is the most popular stock in this table. On the other hand First Interstate Bancsystem Inc (NASDAQ:FIBK) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Cadence Bancorporation (NYSE:CADE) is more popular among hedge funds. Our overall hedge fund sentiment score for CADE is 78.9. 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 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 returned 24% in 2021 through October 22nd but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on CADE as the stock returned 4.4% since the end of June (through 10/22) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Follow Cadence Bancorporation (NYSE:CADE)
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Disclosure: None. This article was originally published at Insider Monkey.
