Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in CenterState Bank Corporation (NASDAQ:CSFL)? The smart money sentiment can provide an answer to this question.
Is CenterState Bank Corporation (NASDAQ:CSFL) a buy right now? Prominent investors are turning less bullish. The number of bullish hedge fund positions dropped by 3 in recent months. Our calculations also showed that CSFL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). CSFL was in 12 hedge funds’ portfolios at the end of September. There were 15 hedge funds in our database with CSFL holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Steven Cohen of Point72 Asset Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the recent hedge fund action regarding CenterState Bank Corporation (NASDAQ:CSFL).
How have hedgies been trading CenterState Bank Corporation (NASDAQ:CSFL)?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CSFL over the last 17 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in CenterState Bank Corporation (NASDAQ:CSFL), which was worth $36.3 million at the end of the third quarter. On the second spot was Forest Hill Capital which amassed $13.4 million worth of shares. Royce & Associates, Castine Capital Management, and 12th Street Asset 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 Forest Hill Capital allocated the biggest weight to CenterState Bank Corporation (NASDAQ:CSFL), around 4.73% of its 13F portfolio. Castine Capital Management is also relatively very bullish on the stock, earmarking 2.65 percent of its 13F equity portfolio to CSFL.
Since CenterState Bank Corporation (NASDAQ:CSFL) has experienced a decline in interest from hedge fund managers, it’s easy to see that there was a specific group of funds who were dropping their full holdings heading into Q4. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace dumped the largest position of the 750 funds watched by Insider Monkey, valued at close to $5.6 million in stock, and Ira Unschuld’s Brant Point Investment Management was right behind this move, as the fund cut about $2.3 million worth. These moves are important to note, as total hedge fund interest dropped by 3 funds heading into Q4.
Let’s check out hedge fund activity in other stocks similar to CenterState Bank Corporation (NASDAQ:CSFL). These stocks are Mercury General Corporation (NYSE:MCY), Sunstone Hotel Investors Inc (NYSE:SHO), Appian Corporation (NASDAQ:APPN), and Olin Corporation (NYSE:OLN). This group of stocks’ market values are similar to CSFL’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MCY | 20 | 200510 | 4 |
| SHO | 21 | 221672 | 0 |
| APPN | 17 | 474518 | 5 |
| OLN | 27 | 489655 | 4 |
| Average | 21.25 | 346589 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $347 million. That figure was $84 million in CSFL’s case. Olin Corporation (NYSE:OLN) is the most popular stock in this table. On the other hand Appian Corporation (NASDAQ:APPN) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks CenterState Bank Corporation (NASDAQ:CSFL) is even less popular than APPN. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on CSFL, though not to the same extent, as the stock returned 6% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
