Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 13.1% in the 2.5 months of 2019 (including dividend payments). Conversely, hedge funds’ 15 preferred S&P 500 stocks generated a return of 19.7% during the same period, with 93% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Ameris Bancorp (NASDAQ:ABCB).
Ameris Bancorp (NASDAQ:ABCB) investors should be aware of an increase in enthusiasm from smart money in recent months. ABCB was in 18 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 13 hedge funds in our database with ABCB positions at the end of the previous quarter. Our calculations also showed that ABCB isn’t among the 30 most popular stocks among hedge funds.
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. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let’s take a peek at the new hedge fund action encompassing Ameris Bancorp (NASDAQ:ABCB).
How have hedgies been trading Ameris Bancorp (NASDAQ:ABCB)?
At Q4’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from the second quarter of 2018. On the other hand, there were a total of 8 hedge funds with a bullish position in ABCB a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Polaris Capital Management was the largest shareholder of Ameris Bancorp (NASDAQ:ABCB), with a stake worth $34 million reported as of the end of December. Trailing Polaris Capital Management was Mendon Capital Advisors, which amassed a stake valued at $32.7 million. Marshall Wace LLP, Citadel Investment Group, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, specific money managers have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, initiated the most valuable position in Ameris Bancorp (NASDAQ:ABCB). Citadel Investment Group had $9.9 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also made a $4.7 million investment in the stock during the quarter. The following funds were also among the new ABCB investors: Matthew Hulsizer’s PEAK6 Capital Management, Noam Gottesman’s GLG Partners, and Benjamin A. Smith’s Laurion Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Ameris Bancorp (NASDAQ:ABCB) but similarly valued. These stocks are Regenxbio Inc (NASDAQ:RGNX), Orion Engineered Carbons SA (NYSE:OEC), Heartland Express, Inc. (NASDAQ:HTLD), and Yext, Inc. (NYSE:YEXT). This group of stocks’ market caps match ABCB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RGNX | 17 | 232321 | -7 |
| OEC | 23 | 329505 | 0 |
| HTLD | 7 | 7945 | -4 |
| YEXT | 13 | 129557 | -3 |
| Average | 15 | 174832 | -3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $175 million. That figure was $120 million in ABCB’s case. Orion Engineered Carbons SA (NYSE:OEC) is the most popular stock in this table. On the other hand Heartland Express, Inc. (NASDAQ:HTLD) is the least popular one with only 7 bullish hedge fund positions. Ameris Bancorp (NASDAQ:ABCB) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 ABCB wasn’t nearly as popular as these 15 stock and hedge funds that were betting on ABCB were disappointed as the stock returned 10.1% 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.
