Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (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. How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding IBERIABANK Corporation (NASDAQ:IBKC).
IBERIABANK Corporation (NASDAQ:IBKC) was in 32 hedge funds’ portfolios at the end of December. IBKC investors should pay attention to an increase in support from the world’s most elite money managers lately. There were 22 hedge funds in our database with IBKC holdings at the end of the previous quarter. Our calculations also showed that IBKC 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).
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 monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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.
Joe Huber of Huber Capital 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 analyze the recent hedge fund action surrounding IBERIABANK Corporation (NASDAQ:IBKC).
What have hedge funds been doing with IBERIABANK Corporation (NASDAQ:IBKC)?
Heading into the first quarter of 2020, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 45% from one quarter earlier. By comparison, 24 hedge funds held shares or bullish call options in IBKC a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in IBERIABANK Corporation (NASDAQ:IBKC) was held by Citadel Investment Group, which reported holding $66.1 million worth of stock at the end of September. It was followed by Alpine Associates with a $27.6 million position. Other investors bullish on the company included Tudor Investment Corp, D E Shaw, and Millennium Management. In terms of the portfolio weights assigned to each position One Fin Capital Management allocated the biggest weight to IBERIABANK Corporation (NASDAQ:IBKC), around 5.83% of its 13F portfolio. Truvvo Partners is also relatively very bullish on the stock, setting aside 2.37 percent of its 13F equity portfolio to IBKC.
As industrywide interest jumped, key money managers were leading the bulls’ herd. Alpine Associates, managed by Robert Emil Zoellner, initiated the most outsized position in IBERIABANK Corporation (NASDAQ:IBKC). Alpine Associates had $27.6 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $19.8 million investment in the stock during the quarter. The other funds with brand new IBKC positions are John Overdeck and David Siegel’s Two Sigma Advisors, David MacKnight’s One Fin Capital Management, and Joe Huber’s Huber Capital Management.
Let’s also examine hedge fund activity in other stocks similar to IBERIABANK Corporation (NASDAQ:IBKC). These stocks are Texas Roadhouse Inc (NASDAQ:TXRH), Q2 Holdings Inc (NYSE:QTWO), Umpqua Holdings Corp (NASDAQ:UMPQ), and Sanderson Farms, Inc. (NASDAQ:SAFM). This group of stocks’ market values are closest to IBKC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TXRH | 23 | 238041 | -2 |
| QTWO | 20 | 315819 | 1 |
| UMPQ | 16 | 234753 | -7 |
| SAFM | 36 | 700510 | 12 |
| Average | 23.75 | 372281 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $372 million. That figure was $235 million in IBKC’s case. Sanderson Farms, Inc. (NASDAQ:SAFM) is the most popular stock in this table. On the other hand Umpqua Holdings Corp (NASDAQ:UMPQ) is the least popular one with only 16 bullish hedge fund positions. IBERIABANK Corporation (NASDAQ:IBKC) 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 IBKC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on IBKC were disappointed as the stock returned -50.9% 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.
