The market has been volatile in the fourth quarter as the Federal Reserve continued its rate hikes to normalize the interest rates. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, and the funds’ movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of 1st Source Corporation (NASDAQ:SRCE) and find out how it is affected by hedge funds’ moves.
1st Source Corporation (NASDAQ:SRCE) investors should pay attention to an increase in activity from the world’s largest hedge funds of late. SRCE was in 9 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 8 hedge funds in our database with SRCE holdings at the end of the previous quarter. Our calculations also showed that SRCE isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a look at the latest hedge fund action surrounding 1st Source Corporation (NASDAQ:SRCE).
What does the smart money think about 1st Source Corporation (NASDAQ:SRCE)?
At Q4’s end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SRCE over the last 14 quarters. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
The largest stake in 1st Source Corporation (NASDAQ:SRCE) was held by Renaissance Technologies, which reported holding $10.2 million worth of stock at the end of December. It was followed by Millennium Management with a $5 million position. Other investors bullish on the company included AQR Capital Management, Citadel Investment Group, and D E Shaw.
As industrywide interest jumped, specific money managers were leading the bulls’ herd. D E Shaw, managed by D. E. Shaw, created the most outsized position in 1st Source Corporation (NASDAQ:SRCE). D E Shaw had $0.4 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $0.2 million position during the quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as 1st Source Corporation (NASDAQ:SRCE) but similarly valued. We will take a look at FormFactor, Inc. (NASDAQ:FORM), BMC Stock Holdings, Inc. (NASDAQ:BMCH), CareDx, Inc. (NASDAQ:CDNA), and CNX Midstream Partners LP (NYSE:CNXM). This group of stocks’ market values are similar to SRCE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FORM | 10 | 47764 | 0 |
| BMCH | 24 | 192261 | -1 |
| CDNA | 22 | 142197 | 3 |
| CNXM | 6 | 13468 | -3 |
| Average | 15.5 | 98923 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $99 million. That figure was $23 million in SRCE’s case. BMC Stock Holdings, Inc. (NASDAQ:BMCH) is the most popular stock in this table. On the other hand CNX Midstream Partners LP (NYSE:CNXM) is the least popular one with only 6 bullish hedge fund positions. 1st Source Corporation (NASDAQ:SRCE) is not the least popular stock in this group but hedge fund interest is still below average. 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately SRCE wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); SRCE investors were disappointed as the stock returned 12% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
