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. Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards International Bancshares Corp (NASDAQ:IBOC).
Is International Bancshares Corp (NASDAQ:IBOC) an exceptional stock to buy now? Money managers are taking an optimistic view. The number of bullish hedge fund positions improved by 3 lately. Our calculations also showed that IBOC 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). IBOC was in 20 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 17 hedge funds in our database with IBOC holdings at the end of the previous quarter.
Today there are plenty of formulas shareholders can use to grade stocks. Two of the less known formulas are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the elite hedge fund managers can outclass the market by a healthy margin (see the details here).
Cliff Asness of AQR 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 we’re going to view the fresh hedge fund action surrounding International Bancshares Corp (NASDAQ:IBOC).
Hedge fund activity in International Bancshares Corp (NASDAQ:IBOC)
Heading into the first quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in IBOC a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in International Bancshares Corp (NASDAQ:IBOC) was held by Polaris Capital Management, which reported holding $55 million worth of stock at the end of September. It was followed by Millennium Management with a $45.6 million position. Other investors bullish on the company included Arrowstreet Capital, AQR Capital Management, and Azora Capital. In terms of the portfolio weights assigned to each position Polaris Capital Management allocated the biggest weight to International Bancshares Corp (NASDAQ:IBOC), around 2.27% of its 13F portfolio. Azora Capital is also relatively very bullish on the stock, earmarking 2.21 percent of its 13F equity portfolio to IBOC.
As aggregate interest increased, specific money managers were breaking ground themselves. Winton Capital Management, managed by David Harding, established the biggest position in International Bancshares Corp (NASDAQ:IBOC). Winton Capital Management had $7.7 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also initiated a $0.8 million position during the quarter. The other funds with brand new IBOC positions are Mika Toikka’s AlphaCrest Capital Management, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Michael Gelband’s ExodusPoint Capital.
Let’s also examine hedge fund activity in other stocks similar to International Bancshares Corp (NASDAQ:IBOC). We will take a look at Red Rock Resorts, Inc. (NASDAQ:RRR), Acceleron Pharma Inc (NASDAQ:XLRN), Apollo Commercial Real Est. Finance Inc (NYSE:ARI), and KAR Auction Services Inc (NYSE:KAR). All of these stocks’ market caps resemble IBOC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RRR | 18 | 363869 | 1 |
| XLRN | 27 | 392663 | 1 |
| ARI | 16 | 81491 | 6 |
| KAR | 26 | 399012 | -7 |
| Average | 21.75 | 309259 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $309 million. That figure was $196 million in IBOC’s case. Acceleron Pharma Inc (NASDAQ:XLRN) is the most popular stock in this table. On the other hand Apollo Commercial Real Est. Finance Inc (NYSE:ARI) is the least popular one with only 16 bullish hedge fund positions. International Bancshares Corp (NASDAQ:IBOC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 IBOC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); IBOC investors were disappointed as the stock returned -43.4% 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 most of these stocks already outperformed the market in Q1.
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.
