We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like International Bancshares Corporation (NASDAQ:IBOC).
International Bancshares Corporation (NASDAQ:IBOC) was in 18 hedge funds’ portfolios at the end of June. IBOC has seen an increase in enthusiasm from smart money recently. There were 14 hedge funds in our database with IBOC positions at the end of the previous quarter. Our calculations also showed that IBOC isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a glance at the key hedge fund action encompassing International Bancshares Corporation (NASDAQ:IBOC).
What does smart money think about International Bancshares Corporation (NASDAQ:IBOC)?
At the end of the second quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in IBOC a year ago. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
The largest stake in International Bancshares Corporation (NASDAQ:IBOC) was held by Polaris Capital Management, which reported holding $46.8 million worth of stock at the end of March. It was followed by Millennium Management with a $43.8 million position. Other investors bullish on the company included Arrowstreet Capital, AQR Capital Management, and Balyasny Asset Management.
As one would reasonably expect, specific money managers were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, created the largest position in International Bancshares Corporation (NASDAQ:IBOC). Citadel Investment Group had $1.5 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $0.5 million position during the quarter. The other funds with brand new IBOC positions are Thomas Bailard’s Bailard Inc, Matthew Hulsizer’s PEAK6 Capital Management, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as International Bancshares Corporation (NASDAQ:IBOC) but similarly valued. These stocks are CONMED Corporation (NASDAQ:CNMD), Wolverine World Wide, Inc. (NYSE:WWW), World Fuel Services Corporation (NYSE:INT), and PolyOne Corporation (NYSE:POL). This group of stocks’ market valuations resemble IBOC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CNMD | 19 | 238590 | -2 |
| WWW | 12 | 49072 | -7 |
| INT | 19 | 149964 | 1 |
| POL | 24 | 224406 | 1 |
| Average | 18.5 | 165508 | -1.75 |
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 $166 million. That figure was $148 million in IBOC’s case. PolyOne Corporation (NYSE:POL) is the most popular stock in this table. On the other hand Wolverine World Wide, Inc. (NYSE:WWW) is the least popular one with only 12 bullish hedge fund positions. International Bancshares Corporation (NASDAQ:IBOC) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on IBOC, though not to the same extent, as the stock returned 3.9% during the third quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
