First Mid-Illinois Bancshares, Inc. (FMBH): Are Hedge Funds Right About This Stock?

In this article we will take a look at whether hedge funds think First Mid-Illinois Bancshares, Inc. (NASDAQ:FMBH) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

First Mid-Illinois Bancshares, Inc. (NASDAQ:FMBH) has experienced a decrease in support from the world’s most elite money managers of late. FMBH was in 5 hedge funds’ portfolios at the end of March. There were 6 hedge funds in our database with FMBH holdings at the end of the previous quarter. Our calculations also showed that FMBH 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Roger Ibbotson of Zebra Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the key hedge fund action regarding First Mid-Illinois Bancshares, Inc. (NASDAQ:FMBH).

How have hedgies been trading First Mid-Illinois Bancshares, Inc. (NASDAQ:FMBH)?

Heading into the second quarter of 2020, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the fourth quarter of 2019. By comparison, 3 hedge funds held shares or bullish call options in FMBH a year ago. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Castine Capital Management, managed by Paul Magidson, Jonathan Cohen. And Ostrom Enders, holds the biggest position in First Mid-Illinois Bancshares, Inc. (NASDAQ:FMBH). Castine Capital Management has a $2.8 million position in the stock, comprising 1.5% of its 13F portfolio. Coming in second is Renaissance Technologies, holding a $2.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions encompass David Harding’s Winton Capital Management, Ken Griffin’s Citadel Investment Group and Roger Ibbotson’s Zebra Capital Management. In terms of the portfolio weights assigned to each position Castine Capital Management allocated the biggest weight to First Mid-Illinois Bancshares, Inc. (NASDAQ:FMBH), around 1.51% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, dishing out 0.44 percent of its 13F equity portfolio to FMBH.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium 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 none of the 750+ hedge funds tracked by Insider Monkey identified FMBH as a viable investment and initiated a position in the stock.

Let’s also examine hedge fund activity in other stocks similar to First Mid-Illinois Bancshares, Inc. (NASDAQ:FMBH). These stocks are AngioDynamics, Inc. (NASDAQ:ANGO), Cellectis SA (NASDAQ:CLLS), Waterstone Financial, Inc. (NASDAQ:WSBF), and Alliance Resource Partners, L.P. (NASDAQ:ARLP). All of these stocks’ market caps are closest to FMBH’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $7 million in FMBH’s case. Waterstone Financial, Inc. (NASDAQ:WSBF) is the most popular stock in this table. On the other hand Alliance Resource Partners, L.P. (NASDAQ:ARLP) is the least popular one with only 4 bullish hedge fund positions. First Mid-Illinois Bancshares, Inc. (NASDAQ:FMBH) 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. 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately FMBH wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); FMBH investors were disappointed as the stock returned 8.8% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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