Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018 as investors first worried over the possible ramifications of rising interest rates and the escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only about 60% S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of German American Bancorp., Inc. (NASDAQ:GABC) and see how the stock is affected by the recent hedge fund activity.
German American Bancorp., Inc. (NASDAQ:GABC) investors should be aware of an increase in hedge fund interest in recent months. Our calculations also showed that GABC isn’t among the 30 most popular stocks among hedge funds (see the video below).
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s view the latest hedge fund action encompassing German American Bancorp., Inc. (NASDAQ:GABC).
What have hedge funds been doing with German American Bancorp., Inc. (NASDAQ:GABC)?
At the end of the second quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the previous quarter. By comparison, 5 hedge funds held shares or bullish call options in GABC a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in German American Bancorp., Inc. (NASDAQ:GABC) was held by Renaissance Technologies, which reported holding $9.8 million worth of stock at the end of March. It was followed by Millennium Management with a $3.6 million position. Other investors bullish on the company included Marshall Wace LLP, Two Sigma Advisors, and Citadel Investment Group.
As one would reasonably expect, key hedge funds were leading the bulls’ herd. Driehaus Capital, managed by Richard Driehaus, established the largest position in German American Bancorp., Inc. (NASDAQ:GABC). Driehaus Capital had $0.6 million invested in the company at the end of the quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as German American Bancorp., Inc. (NASDAQ:GABC) but similarly valued. We will take a look at Origin Bancorp, Inc. (NASDAQ:OBNK), Quanterix Corporation (NASDAQ:QTRX), Lakeland Bancorp, Inc. (NASDAQ:LBAI), and HomeStreet Inc (NASDAQ:HMST). This group of stocks’ market valuations are similar to GABC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OBNK | 4 | 25069 | 0 |
| QTRX | 8 | 37926 | 1 |
| LBAI | 11 | 52691 | -1 |
| HMST | 9 | 17189 | -1 |
| Average | 8 | 33219 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $33 million. That figure was $18 million in GABC’s case. Lakeland Bancorp, Inc. (NASDAQ:LBAI) is the most popular stock in this table. On the other hand Origin Bancorp, Inc. (NASDAQ:OBNK) is the least popular one with only 4 bullish hedge fund positions. German American Bancorp., Inc. (NASDAQ:GABC) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on GABC as the stock returned 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.
