We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind let’s see whether ServisFirst Bancshares, Inc. (NASDAQ:SFBS) represents a good buying opportunity at the moment. Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
ServisFirst Bancshares, Inc. (NASDAQ:SFBS) was in 9 hedge funds’ portfolios at the end of December. SFBS has seen an increase in activity from the world’s largest hedge funds lately. There were 8 hedge funds in our database with SFBS holdings at the end of the previous quarter. Our calculations also showed that SFBS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a peek at the recent hedge fund action regarding ServisFirst Bancshares, Inc. (NASDAQ:SFBS).
How are hedge funds trading ServisFirst Bancshares, Inc. (NASDAQ:SFBS)?
Heading into the first quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SFBS over the last 18 quarters. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of ServisFirst Bancshares, Inc. (NASDAQ:SFBS), with a stake worth $3.2 million reported as of the end of September. Trailing Fisher Asset Management was Citadel Investment Group, which amassed a stake valued at $2.9 million. Interval Partners, Renaissance Technologies, and GAMCO Investors 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 Interval Partners allocated the biggest weight to ServisFirst Bancshares, Inc. (NASDAQ:SFBS), around 0.05% of its 13F portfolio. Driehaus Capital is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to SFBS.
As one would reasonably expect, some big names have been driving this bullishness. Driehaus Capital, managed by Richard Driehaus, established the most outsized position in ServisFirst Bancshares, Inc. (NASDAQ:SFBS). Driehaus Capital had $0.6 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also initiated a $0.3 million position during the quarter.
Let’s go over hedge fund activity in other stocks similar to ServisFirst Bancshares, Inc. (NASDAQ:SFBS). We will take a look at Papa John’s International, Inc. (NASDAQ:PZZA), The Geo Group, Inc. (NYSE:GEO), Essential Properties Realty Trust, Inc. (NYSE:EPRT), and Minerals Technologies Inc (NYSE:MTX). All of these stocks’ market caps are similar to SFBS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PZZA | 28 | 352372 | 3 |
| GEO | 22 | 104432 | -1 |
| EPRT | 9 | 20912 | -7 |
| MTX | 14 | 103244 | -5 |
| Average | 18.25 | 145240 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $145 million. That figure was $11 million in SFBS’s case. Papa John’s International, Inc. (NASDAQ:PZZA) is the most popular stock in this table. On the other hand Essential Properties Realty Trust, Inc. (NYSE:EPRT) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks ServisFirst Bancshares, Inc. (NASDAQ:SFBS) is even less popular than EPRT. Hedge funds dodged a bullet by taking a bearish stance towards SFBS. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately SFBS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SFBS investors were disappointed as the stock returned -22.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
