“The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak,” are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Independent Bank Corp (NASDAQ:INDB) and see how it was affected.
Independent Bank Corp (NASDAQ:INDB) was in 11 hedge funds’ portfolios at the end of June. INDB investors should pay attention to an increase in hedge fund sentiment in recent months. There were 6 hedge funds in our database with INDB holdings at the end of the previous quarter. Our calculations also showed that INDB isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely 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. We’re going to view the latest hedge fund action regarding Independent Bank Corp (NASDAQ:INDB).
Hedge fund activity in Independent Bank Corp (NASDAQ:INDB)
Heading into the third quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 83% from the previous quarter. By comparison, 6 hedge funds held shares or bullish call options in INDB a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
The largest stake in Independent Bank Corp (NASDAQ:INDB) was held by Fisher Asset Management, which reported holding $6.7 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $6 million position. Other investors bullish on the company included Millennium Management, GRT Capital Partners, and AQR Capital Management.
Consequently, some big names were leading the bulls’ herd. Millennium Management, managed by Israel Englander, created the biggest position in Independent Bank Corp (NASDAQ:INDB). Millennium Management had $0.7 million invested in the company at the end of the quarter. Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s GRT Capital Partners also made a $0.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Richard Driehaus’s Driehaus Capital, Bernard Horn’s Polaris Capital Management, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s check out hedge fund activity in other stocks similar to Independent Bank Corp (NASDAQ:INDB). We will take a look at Beacon Roofing Supply, Inc. (NASDAQ:BECN), United States Steel Corporation (NYSE:X), Halozyme Therapeutics, Inc. (NASDAQ:HALO), and Piedmont Office Realty Trust, Inc. (NYSE:PDM). This group of stocks’ market caps are similar to INDB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BECN | 16 | 400438 | -2 |
| X | 19 | 87590 | -5 |
| HALO | 19 | 203619 | 1 |
| PDM | 12 | 123941 | -1 |
| Average | 16.5 | 203897 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $204 million. That figure was $17 million in INDB’s case. United States Steel Corporation (NYSE:X) is the most popular stock in this table. On the other hand Piedmont Office Realty Trust, Inc. (NYSE:PDM) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Independent Bank Corp (NASDAQ:INDB) is even less popular than PDM. Hedge funds dodged a bullet by taking a bearish stance towards INDB. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately INDB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); INDB investors were disappointed as the stock returned -1.4% during the third quarter 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 in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
