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. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of Texas Capital Bancshares Inc (NASDAQ:TCBI) based on that data.
Texas Capital Bancshares Inc (NASDAQ:TCBI) was in 26 hedge funds’ portfolios at the end of December. TCBI shareholders have witnessed an increase in hedge fund interest in recent months. There were 22 hedge funds in our database with TCBI holdings at the end of the previous quarter. Our calculations also showed that TCBI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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.
Ken Fisher of Fisher 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. Now let’s check out the recent hedge fund action regarding Texas Capital Bancshares Inc (NASDAQ:TCBI).
How are hedge funds trading Texas Capital Bancshares Inc (NASDAQ:TCBI)?
At Q4’s end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TCBI over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Texas Capital Bancshares Inc (NASDAQ:TCBI) was held by Citadel Investment Group, which reported holding $65.3 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $41.2 million position. Other investors bullish on the company included D E Shaw, Kettle Hill Capital Management, and Fisher Asset Management. In terms of the portfolio weights assigned to each position Spindletop Capital allocated the biggest weight to Texas Capital Bancshares Inc (NASDAQ:TCBI), around 10.7% of its 13F portfolio. Kettle Hill Capital Management is also relatively very bullish on the stock, designating 4.63 percent of its 13F equity portfolio to TCBI.
As industrywide interest jumped, key money managers were breaking ground themselves. Samlyn Capital, managed by Robert Pohly, assembled the largest position in Texas Capital Bancshares Inc (NASDAQ:TCBI). Samlyn Capital had $12.1 million invested in the company at the end of the quarter. Robert Emil Zoellner’s Alpine Associates also made a $11.3 million investment in the stock during the quarter. The other funds with brand new TCBI positions are Ravi Chopra’s Azora Capital, Gregg Moskowitz’s Interval Partners, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s check out hedge fund activity in other stocks similar to Texas Capital Bancshares Inc (NASDAQ:TCBI). We will take a look at Fulton Financial Corp (NASDAQ:FULT), Independent Bank Corp (NASDAQ:INDB), Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN), and World Fuel Services Corporation (NYSE:INT). This group of stocks’ market valuations match TCBI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FULT | 14 | 28333 | -3 |
| INDB | 14 | 17622 | 1 |
| BHVN | 35 | 500626 | -1 |
| INT | 22 | 223464 | 3 |
| Average | 21.25 | 192511 | 0 |
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 $193 million. That figure was $251 million in TCBI’s case. Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) is the most popular stock in this table. On the other hand Fulton Financial Corp (NASDAQ:FULT) is the least popular one with only 14 bullish hedge fund positions. Texas Capital Bancshares Inc (NASDAQ:TCBI) 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 TCBI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TCBI were disappointed as the stock returned -59.8% 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.
