We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about BancorpSouth, Inc. (NYSE:BXS) in this article.
BancorpSouth, Inc. (NYSE:BXS) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 14 hedge funds’ portfolios at the end of the fourth quarter of 2019. At the end of this article we will also compare BXS to other stocks including Home Bancshares Inc (NASDAQ:HOMB), WNS (Holdings) Limited (NYSE:WNS), and Manchester United PLC (NYSE:MANU) to get a better sense of its popularity.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Dmitry Balyasny of Balyasny Asset Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s check out the latest hedge fund action regarding BancorpSouth, Inc. (NYSE:BXS).
What have hedge funds been doing with BancorpSouth, Inc. (NYSE:BXS)?
At Q4’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in BXS over the last 18 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Among these funds, Fisher Asset Management held the most valuable stake in BancorpSouth, Inc. (NYSE:BXS), which was worth $28.2 million at the end of the third quarter. On the second spot was Balyasny Asset Management which amassed $8.2 million worth of shares. Interval Partners, Citadel Investment Group, and D E Shaw 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 Castine Capital Management allocated the biggest weight to BancorpSouth, Inc. (NYSE:BXS), around 0.86% of its 13F portfolio. Interval Partners is also relatively very bullish on the stock, designating 0.29 percent of its 13F equity portfolio to BXS.
Because BancorpSouth, Inc. (NYSE:BXS) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of fund managers who sold off their full holdings heading into Q4. Interestingly, Israel Englander’s Millennium Management sold off the biggest investment of all the hedgies followed by Insider Monkey, totaling close to $14.5 million in stock, and Steven Richman’s East Side Capital (RR Partners) was right behind this move, as the fund dumped about $5.6 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to BancorpSouth, Inc. (NYSE:BXS). These stocks are Home Bancshares Inc (NASDAQ:HOMB), WNS (Holdings) Limited (NYSE:WNS), Manchester United PLC (NYSE:MANU), and Balchem Corporation (NASDAQ:BCPC). This group of stocks’ market valuations resemble BXS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HOMB | 12 | 14017 | 0 |
| WNS | 20 | 227803 | 1 |
| MANU | 10 | 35986 | -2 |
| BCPC | 12 | 62978 | 3 |
| Average | 13.5 | 85196 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $85 million. That figure was $63 million in BXS’s case. WNS (Holdings) Limited (NYSE:WNS) is the most popular stock in this table. On the other hand Manchester United PLC (NYSE:MANU) is the least popular one with only 10 bullish hedge fund positions. BancorpSouth, Inc. (NYSE:BXS) 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately BXS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BXS were disappointed as the stock returned -43.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
