Do Hedge Funds Love Home Bancshares Inc (HOMB)?

Before we spend many hours researching a company, we’d like to analyze what hedge funds and billionaire investors think of the stock first. We would like to do so because the elite investors’ consensus returns have been exceptional. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last 12 months ending in October 30. Sixty three percent of these 30 stocks outperformed the market. Although the elite funds occasionally have their duds, such as Micron and Anadarko Petroleum, which fell 50% and 26%, respectively during the same time period, the hedge fund picks seem to work on average. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Home Bancshares Inc (NASDAQ:HOMB).

Home Bancshares Inc (NASDAQ:HOMB) is a $2.8 billion bank holding company for Centennial Bank. Its stock gained 11% in the third quarter, but at the same time it experienced a decrease in enthusiasm from smart money. At the end of this article we will also compare HOMB to other stocks, including Southwest Gas Corporation (NYSE:SWX), Tenneco Inc (NYSE:TEN), and Con-way Inc (NYSE:CNW) to get a better sense of its popularity.

According to most traders, hedge funds are viewed as unimportant, outdated financial vehicles of yesteryear. While there are over an 8000 funds with their doors open at present, Our researchers hone in on the bigwigs of this club, around 700 funds. These money managers manage bulk of the smart money’s total asset base, and by paying attention to their inimitable stock picks, Insider Monkey has deciphered numerous investment strategies that have historically outrun the broader indices. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Now, let’s review the latest action regarding Home Bancshares Inc (NASDAQ:HOMB).

How have hedgies been trading Home Bancshares Inc (NASDAQ:HOMB)?

Heading into Q4, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, down by 7% from one quarter earlier. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Forest Hill Capital, managed by Mark Lee, holds the most valuable position in Home Bancshares Inc (NASDAQ:HOMB). Forest Hill Capital has a $30.9 million position in the stock, comprising 2.9% of its 13F portfolio. On Forest Hill Capital’s heels is Key Colony Management, led by Alex Lieblong, holding a $25.8 million position; the fund has 34.3% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish contain Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Sharif Siddiqui’s Alpenglow Capital, and Ken Griffin’s Citadel Investment Group.

Because Home Bancshares Inc (NASDAQ:HOMB) has faced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there is a sect of funds who were dropping their full holdings by the end of the third quarter. Interestingly, George Hall’s Clinton Group dumped the largest position of the 700 funds followed by Insider Monkey, totaling an estimated $0.7 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund cut about $0.7 million worth of shares.

Let’s now review hedge fund activity in other stocks similar to Home Bancshares Inc (NASDAQ:HOMB). These stocks are Southwest Gas Corporation (NYSE:SWX), Tenneco Inc (NYSE:TEN), Con-way Inc (NYSE:CNW), and Teck Resources Ltd (USA) (NYSE:TCK). This group of stocks’ market caps are closest to HOMB’s market cap.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $243 million. That figure was just $83 million in HOMB’s case. Tenneco Inc (NYSE:TEN) is the most popular stock in this table. On the other hand, Southwest Gas Corporation (NYSE:SWX) is the least popular one with only 12 bullish hedge fund positions. Home Bancshares Inc (NASDAQ:HOMB) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard TEN might be a better candidate to consider a long position.