Hedge Funds Are Coming Back To South Plains Financial, Inc. (SPFI)

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter of 2021. One of these stocks was South Plains Financial, Inc. (NASDAQ:SPFI).

South Plains Financial, Inc. (NASDAQ:SPFI) investors should be aware of an increase in hedge fund sentiment of late. South Plains Financial, Inc. (NASDAQ:SPFI) was in 6 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 8. There were 3 hedge funds in our database with SPFI holdings at the end of December. Our calculations also showed that SPFI isn’t among the 30 most popular stocks among hedge funds (click for Q1 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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Matthew Lindenbaum of Basswood Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to take a look at the recent hedge fund action encompassing South Plains Financial, Inc. (NASDAQ:SPFI).

Do Hedge Funds Think SPFI Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 100% from the fourth quarter of 2020. On the other hand, there were a total of 3 hedge funds with a bullish position in SPFI a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

More specifically, Polaris Capital Management was the largest shareholder of South Plains Financial, Inc. (NASDAQ:SPFI), with a stake worth $4.4 million reported as of the end of March. Trailing Polaris Capital Management was Basswood Capital, which amassed a stake valued at $1.8 million. Renaissance Technologies, Millennium Management, and Zebra Capital Management 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 Zebra Capital Management allocated the biggest weight to South Plains Financial, Inc. (NASDAQ:SPFI), around 0.37% of its 13F portfolio. Polaris Capital Management is also relatively very bullish on the stock, designating 0.14 percent of its 13F equity portfolio to SPFI.

As aggregate interest increased, specific money managers have been driving this bullishness. Basswood Capital, managed by Matthew Lindenbaum, established the most outsized position in South Plains Financial, Inc. (NASDAQ:SPFI). Basswood Capital had $1.8 million invested in the company at the end of the quarter. Roger Ibbotson’s Zebra Capital Management also made a $0.3 million investment in the stock during the quarter. The only other fund with a brand new SPFI position is D. E. Shaw’s D E Shaw.

Let’s check out hedge fund activity in other stocks similar to South Plains Financial, Inc. (NASDAQ:SPFI). We will take a look at Profound Medical Corp. (NASDAQ:PROF), Aenza S.A.A. (NYSE:AENZ), JOANN Inc. (NASDAQ:JOAN), Red River Bancshares, Inc. (NASDAQ:RRBI), Diginex Limited (NASDAQ:EQOS), ShotSpotter, Inc. (NASDAQ:SSTI), and Tuniu Corporation (NASDAQ:TOUR). This group of stocks’ market values are closest to SPFI’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.6 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $9 million in SPFI’s case. Profound Medical Corp. (NASDAQ:PROF) is the most popular stock in this table. On the other hand Aenza S.A.A. (NYSE:AENZ) is the least popular one with only 1 bullish hedge fund positions. South Plains Financial, Inc. (NASDAQ:SPFI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SPFI is 49.7. 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. 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 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 19.3% in 2021 through June 25th and surpassed the market again by 4.8 percentage points. Unfortunately SPFI wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SPFI investors were disappointed as the stock returned 3% since the end of March (through 6/25) 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 in 2021.

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