While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Texas Capital Bancshares Inc (NASDAQ:TCBI).
Is Texas Capital Bancshares Inc (NASDAQ:TCBI) a worthy investment now? Money managers were in a bearish mood. The number of long hedge fund positions decreased by 2 lately. Texas Capital Bancshares Inc (NASDAQ:TCBI) was in 27 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 29. Our calculations also showed that TCBI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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Ryan Tolkin, CIO of Schonfeld Strategic Advisors
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Do Hedge Funds Think TCBI Is A Good Stock To Buy Now?
At second quarter’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in TCBI a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, D E Shaw, managed by D. E. Shaw, holds the biggest position in Texas Capital Bancshares Inc (NASDAQ:TCBI). D E Shaw has a $46 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Renaissance Technologies, which holds a $31.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism comprise Israel Englander’s Millennium Management, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors and Chuck Royce’s Royce & Associates. In terms of the portfolio weights assigned to each position Gillson Capital allocated the biggest weight to Texas Capital Bancshares Inc (NASDAQ:TCBI), around 1.74% of its 13F portfolio. MFP Investors is also relatively very bullish on the stock, setting aside 1.52 percent of its 13F equity portfolio to TCBI.
Due to the fact that Texas Capital Bancshares Inc (NASDAQ:TCBI) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of funds who were dropping their positions entirely by the end of the second quarter. Intriguingly, Frank Fu’s CaaS Capital cut the largest investment of the “upper crust” of funds monitored by Insider Monkey, totaling about $55.9 million in stock, and Michael Kharitonov and Jon David McAuliffe’s Voleon Capital was right behind this move, as the fund said goodbye to about $16 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 2 funds by the end of the second quarter.
Let’s now review hedge fund activity in other stocks similar to Texas Capital Bancshares Inc (NASDAQ:TCBI). These stocks are MaxLinear, Inc. (NYSE:MXL), LiveRamp Holdings, Inc. (NYSE:RAMP), VEON Ltd. (NASDAQ:VEON), Copa Holdings, S.A. (NYSE:CPA), Cronos Group Inc. (NASDAQ:CRON), Independent Bank Group Inc (NASDAQ:IBTX), and Equity Commonwealth (NYSE:EQC). This group of stocks’ market valuations match TCBI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MXL | 21 | 134493 | 2 |
| RAMP | 25 | 331803 | -1 |
| VEON | 13 | 51452 | 5 |
| CPA | 14 | 205970 | -4 |
| CRON | 8 | 102753 | -2 |
| IBTX | 6 | 70228 | -3 |
| EQC | 23 | 159058 | 2 |
| Average | 15.7 | 150822 | -0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.7 hedge funds with bullish positions and the average amount invested in these stocks was $151 million. That figure was $324 million in TCBI’s case. LiveRamp Holdings, Inc. (NYSE:RAMP) is the most popular stock in this table. On the other hand Independent Bank Group Inc (NASDAQ:IBTX) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Texas Capital Bancshares Inc (NASDAQ:TCBI) is more popular among hedge funds. Our overall hedge fund sentiment score for TCBI is 80.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Unfortunately TCBI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TCBI were disappointed as the stock returned -5.2% since the end of the second quarter (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
Follow Texas Capital Bancshares Inc (NASDAQ:TCBI)
Follow Texas Capital Bancshares Inc (NASDAQ:TCBI)
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Disclosure: None. This article was originally published at Insider Monkey.
