Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 12 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of First Financial Bankshares Inc (NASDAQ:FFIN).
First Financial Bankshares Inc (NASDAQ:FFIN) investors should pay attention to an increase in hedge fund interest of late. FFIN was in 16 hedge funds’ portfolios at the end of the third quarter of 2019. There were 12 hedge funds in our database with FFIN holdings at the end of the previous quarter. Our calculations also showed that FFIN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Matthew Hulsizer of PEAK6 Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a glance at the fresh hedge fund action surrounding First Financial Bankshares Inc (NASDAQ:FFIN).
How have hedgies been trading First Financial Bankshares Inc (NASDAQ:FFIN)?
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FFIN over the last 17 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.
Of the funds tracked by Insider Monkey, David Harding’s Winton Capital Management has the most valuable position in First Financial Bankshares Inc (NASDAQ:FFIN), worth close to $6.5 million, comprising 0.1% of its total 13F portfolio. Coming in second is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $4.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism consist of Noam Gottesman’s GLG Partners, David E. Shaw’s D E Shaw and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position PDT Partners allocated the biggest weight to First Financial Bankshares Inc (NASDAQ:FFIN), around 0.09% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, earmarking 0.08 percent of its 13F equity portfolio to FFIN.
As aggregate interest increased, some big names have been driving this bullishness. Millennium Management, managed by Israel Englander, established the biggest position in First Financial Bankshares Inc (NASDAQ:FFIN). Millennium Management had $1.5 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also made a $1.4 million investment in the stock during the quarter. The following funds were also among the new FFIN investors: Donald Sussman’s Paloma Partners, Matthew Hulsizer’s PEAK6 Capital Management, and Mike Vranos’s Ellington.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as First Financial Bankshares Inc (NASDAQ:FFIN) but similarly valued. These stocks are Cinemark Holdings, Inc. (NYSE:CNK), ALLETE Inc (NYSE:ALE), AutoNation, Inc. (NYSE:AN), and Brighthouse Financial, Inc. (NASDAQ:BHF). This group of stocks’ market caps match FFIN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CNK | 19 | 232969 | -3 |
| ALE | 19 | 278228 | -5 |
| AN | 21 | 416097 | -1 |
| BHF | 26 | 528808 | 3 |
| Average | 21.25 | 364026 | -1.5 |
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 $364 million. That figure was $26 million in FFIN’s case. Brighthouse Financial, Inc. (NASDAQ:BHF) is the most popular stock in this table. On the other hand Cinemark Holdings, Inc. (NYSE:CNK) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks First Financial Bankshares Inc (NASDAQ:FFIN) is even less popular than CNK. Hedge funds dodged a bullet by taking a bearish stance towards FFIN. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately FFIN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); FFIN investors were disappointed as the stock returned 3.7% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
