In this article you are going to find out whether hedge funds think Home Bancshares Inc (NASDAQ:HOMB) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Home Bancshares Inc (NASDAQ:HOMB) a great investment now? The best stock pickers were becoming less confident. The number of long hedge fund positions dropped by 6 in recent months. Home Bancshares Inc (NASDAQ:HOMB) was in 6 hedge funds’ portfolios at the end of March. The all time high for this statistic is 20. Our calculations also showed that HOMB isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
To the average investor there are many signals market participants put to use to size up publicly traded companies. Two of the best signals are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the elite hedge fund managers can trounce the market by a solid amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Cliff Asness of AQR Capital Management
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. With all of this in mind we’re going to take a look at the key hedge fund action encompassing Home Bancshares Inc (NASDAQ:HOMB).
Do Hedge Funds Think HOMB Is A Good Stock To Buy Now?
At first quarter’s end, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -50% from the fourth quarter of 2020. On the other hand, there were a total of 20 hedge funds with a bullish position in HOMB a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of Home Bancshares Inc (NASDAQ:HOMB), with a stake worth $42 million reported as of the end of March. Trailing Royce & Associates was Basswood Capital, which amassed a stake valued at $4.5 million. Citadel Investment Group, Citadel Investment Group, and AQR 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 Royce & Associates allocated the biggest weight to Home Bancshares Inc (NASDAQ:HOMB), around 0.28% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, setting aside 0.2 percent of its 13F equity portfolio to HOMB.
Since Home Bancshares Inc (NASDAQ:HOMB) has witnessed falling interest from the smart money, it’s easy to see that there were a few hedgies that decided to sell off their entire stakes in the first quarter. It’s worth mentioning that Valerie Malter’s Matarin Capital dumped the largest investment of all the hedgies watched by Insider Monkey, totaling about $2.7 million in stock. Israel Englander’s fund, Millennium Management, also said goodbye to its stock, about $0.5 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 6 funds in the first quarter.
Let’s go over hedge fund activity in other stocks similar to Home Bancshares Inc (NASDAQ:HOMB). We will take a look at Inovalon Holdings Inc (NASDAQ:INOV), Highwoods Properties Inc (NYSE:HIW), Ortho Clinical Diagnostics Holdings plc (NASDAQ:OCDX), PacWest Bancorp (NASDAQ:PACW), Radian Group Inc (NYSE:RDN), ACI Worldwide Inc (NASDAQ:ACIW), and VIZIO Holding Corp. (NYSE:VZIO). This group of stocks’ market values resemble HOMB’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INOV | 17 | 108170 | -5 |
| HIW | 20 | 117413 | -1 |
| OCDX | 23 | 328347 | 23 |
| PACW | 31 | 599517 | 1 |
| RDN | 30 | 436078 | -7 |
| ACIW | 23 | 686814 | -7 |
| VZIO | 19 | 126361 | 19 |
| Average | 23.3 | 343243 | 3.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.3 hedge funds with bullish positions and the average amount invested in these stocks was $343 million. That figure was $49 million in HOMB’s case. PacWest Bancorp (NASDAQ:PACW) is the most popular stock in this table. On the other hand Inovalon Holdings Inc (NASDAQ:INOV) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Home Bancshares Inc (NASDAQ:HOMB) is even less popular than INOV. Our overall hedge fund sentiment score for HOMB is 8. 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. Hedge funds dodged a bullet by taking a bearish stance towards HOMB. Our calculations showed that the top 10 most popular hedge fund stocks 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 but managed to beat the market again by 4.8 percentage points. Unfortunately HOMB wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); HOMB investors were disappointed as the stock returned -4.9% since the end of the first quarter (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 since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
