In this article we are going to use hedge fund sentiment as a tool and determine whether Texas Capital Bancshares Inc (NASDAQ:TCBI) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Texas Capital Bancshares Inc (NASDAQ:TCBI) investors should pay attention to an increase in hedge fund sentiment lately. Texas Capital Bancshares Inc (NASDAQ:TCBI) was in 32 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic was previously 29. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 27 hedge funds in our database with TCBI holdings at the end of June. Our calculations also showed that TCBI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Fred Cummings of Elizabeth Park Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Now let’s take a glance at the recent hedge fund action surrounding Texas Capital Bancshares Inc (NASDAQ:TCBI).
Do Hedge Funds Think TCBI Is A Good Stock To Buy Now?
At the end of September, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TCBI over the last 25 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in Texas Capital Bancshares Inc (NASDAQ:TCBI) was held by D E Shaw, which reported holding $37.8 million worth of stock at the end of September. It was followed by Carlson Capital with a $25.8 million position. Other investors bullish on the company included AQR Capital Management, Millennium Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Elizabeth Park Capital Management allocated the biggest weight to Texas Capital Bancshares Inc (NASDAQ:TCBI), around 1.95% of its 13F portfolio. MFP Investors is also relatively very bullish on the stock, dishing out 1.79 percent of its 13F equity portfolio to TCBI.
As aggregate interest increased, specific money managers have jumped into Texas Capital Bancshares Inc (NASDAQ:TCBI) headfirst. Elizabeth Park Capital Management, managed by Fred Cummings, established the biggest position in Texas Capital Bancshares Inc (NASDAQ:TCBI). Elizabeth Park Capital Management had $5.5 million invested in the company at the end of the quarter. Karim Abbadi and Edward McBride’s Centiva Capital also initiated a $1.3 million position during the quarter. The other funds with new positions in the stock are Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital), Jinghua Yan’s TwinBeech Capital, and Steve Cohen’s Point72 Asset Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Texas Capital Bancshares Inc (NASDAQ:TCBI) but similarly valued. These stocks are Intra-Cellular Therapies Inc (NASDAQ:ITCI), Corporate Office Properties Trust (NYSE:OFC), Nelnet, Inc. (NYSE:NNI), ABM Industries, Inc. (NYSE:ABM), Vroom, Inc. (NASDAQ:VRM), Dorman Products Inc. (NASDAQ:DORM), and CNO Financial Group Inc (NYSE:CNO). This group of stocks’ market caps are closest to TCBI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ITCI | 20 | 312334 | -3 |
| OFC | 11 | 52885 | -2 |
| NNI | 14 | 220291 | 0 |
| ABM | 19 | 44030 | -4 |
| VRM | 23 | 119039 | 2 |
| DORM | 17 | 74028 | -1 |
| CNO | 21 | 357135 | 0 |
| Average | 17.9 | 168535 | -1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.9 hedge funds with bullish positions and the average amount invested in these stocks was $169 million. That figure was $284 million in TCBI’s case. Vroom, Inc. (NASDAQ:VRM) is the most popular stock in this table. On the other hand Corporate Office Properties Trust (NYSE:OFC) is the least popular one with only 11 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 90. 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 28.6% in 2021 through November 30th and still beat the market by 5.6 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 -6.2% since the end of the third quarter (through 11/30) 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.
