Legendary investors such as Jeffrey Talpins and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Hilltop Holdings Inc. (NYSE:HTH) from the perspective of those elite funds.
Is Hilltop Holdings Inc. (NYSE:HTH) ready to rally soon? Investors who are in the know are getting more bullish. The number of long hedge fund bets increased by 5 lately. Our calculations also showed that hth isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 40 percentage points since May 2014 through May 30, 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s take a look at the latest hedge fund action encompassing Hilltop Holdings Inc. (NYSE:HTH).
How have hedgies been trading Hilltop Holdings Inc. (NYSE:HTH)?
Heading into the second quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 36% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HTH over the last 15 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Millennium Management held the most valuable stake in Hilltop Holdings Inc. (NYSE:HTH), which was worth $32.3 million at the end of the first quarter. On the second spot was Royce & Associates which amassed $14.6 million worth of shares. Moreover, Basswood Capital, SCW Capital Management, and Renaissance Technologies were also bullish on Hilltop Holdings Inc. (NYSE:HTH), allocating a large percentage of their portfolios to this stock.
With a general bullishness amongst the heavyweights, specific money managers have jumped into Hilltop Holdings Inc. (NYSE:HTH) headfirst. Castine Capital Management, managed by Paul Magidson, Jonathan Cohen. And Ostrom Enders, initiated the biggest position in Hilltop Holdings Inc. (NYSE:HTH). Castine Capital Management had $5.9 million invested in the company at the end of the quarter. Mark Lee’s Forest Hill Capital also made a $4.4 million investment in the stock during the quarter. The following funds were also among the new HTH investors: Gregg Moskowitz’s Interval Partners, Dmitry Balyasny’s Balyasny Asset Management, and Mark Travis’s Intrepid Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to Hilltop Holdings Inc. (NYSE:HTH). We will take a look at Delphi Technologies PLC (NYSE:DLPH), Core-Mark Holding Company, Inc. (NASDAQ:CORE), Audentes Therapeutics, Inc. (NASDAQ:BOLD), and BancFirst Corporation (NASDAQ:BANF). This group of stocks’ market caps resemble HTH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DLPH | 24 | 274206 | 6 |
| CORE | 24 | 76068 | 4 |
| BOLD | 26 | 597594 | 2 |
| BANF | 11 | 46268 | 2 |
| Average | 21.25 | 248534 | 3.5 |
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 $249 million. That figure was $123 million in HTH’s case. Audentes Therapeutics, Inc. (NASDAQ:BOLD) is the most popular stock in this table. On the other hand BancFirst Corporation (NASDAQ:BANF) is the least popular one with only 11 bullish hedge fund positions. Hilltop Holdings Inc. (NYSE:HTH) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. A small number of hedge funds were also right about betting on HTH as the stock returned 10.7% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
