The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Independent Bank Group Inc (NASDAQ:IBTX) and determine whether the smart money was really smart about this stock.
Independent Bank Group Inc (NASDAQ:IBTX) was in 20 hedge funds’ portfolios at the end of March. IBTX investors should be aware of a decrease in activity from the world’s largest hedge funds lately. There were 23 hedge funds in our database with IBTX positions at the end of the previous quarter. Our calculations also showed that IBTX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
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 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 S&P 500 ETFs by 58 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 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.
Dmitry Balyasny of Balyasny Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. 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. Now let’s view the fresh hedge fund action encompassing Independent Bank Group Inc (NASDAQ:IBTX).
How have hedgies been trading Independent Bank Group Inc (NASDAQ:IBTX)?
At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in IBTX a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Basswood Capital was the largest shareholder of Independent Bank Group Inc (NASDAQ:IBTX), with a stake worth $16.3 million reported as of the end of September. Trailing Basswood Capital was Renaissance Technologies, which amassed a stake valued at $11.5 million. Balyasny Asset Management, Millennium Management, and Azora Capital 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 Azora Capital allocated the biggest weight to Independent Bank Group Inc (NASDAQ:IBTX), around 2.68% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, dishing out 1.9 percent of its 13F equity portfolio to IBTX.
Because Independent Bank Group Inc (NASDAQ:IBTX) has experienced falling interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of money managers that slashed their entire stakes in the first quarter. It’s worth mentioning that Robert Emil Zoellner’s Alpine Associates said goodbye to the biggest stake of the 750 funds followed by Insider Monkey, totaling an estimated $3.7 million in stock. Phil Stone’s fund, Fourthstone LLC, also cut its stock, about $2.1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 3 funds in the first quarter.
Let’s also examine hedge fund activity in other stocks similar to Independent Bank Group Inc (NASDAQ:IBTX). We will take a look at DiamondRock Hospitality Company (NYSE:DRH), Terex Corporation (NYSE:TEX), Intra-Cellular Therapies Inc (NASDAQ:ITCI), and Hope Bancorp, Inc. (NASDAQ:HOPE). This group of stocks’ market valuations are similar to IBTX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DRH | 16 | 38994 | -1 |
| TEX | 21 | 147440 | -1 |
| ITCI | 19 | 99236 | 7 |
| HOPE | 18 | 42707 | -1 |
| Average | 18.5 | 82094 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $82 million. That figure was $74 million in IBTX’s case. Terex Corporation (NYSE:TEX) is the most popular stock in this table. On the other hand DiamondRock Hospitality Company (NYSE:DRH) is the least popular one with only 16 bullish hedge fund positions. Independent Bank Group Inc (NASDAQ:IBTX) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but still beat the market by 17.1 percentage points. Hedge funds were also right about betting on IBTX as the stock returned 84.7% since Q1 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
