In this article we will analyze whether Texas Capital Bancshares Inc (NASDAQ:TCBI) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is Texas Capital Bancshares Inc (NASDAQ:TCBI) a healthy stock for your portfolio? Prominent investors were betting on the stock. The number of long hedge fund positions went up by 19 lately. Texas Capital Bancshares Inc (NASDAQ:TCBI) was in 29 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 26. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TCBI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Clint Carlson of Carlson Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a look at the key hedge fund action surrounding Texas Capital Bancshares Inc (NASDAQ:TCBI).
Do Hedge Funds Think TCBI Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 190% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in TCBI 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Frank Fu’s CaaS Capital has the biggest position in Texas Capital Bancshares Inc (NASDAQ:TCBI), worth close to $55.9 million, corresponding to 0.6% of its total 13F portfolio. On CaaS Capital’s heels is D. E. Shaw of D E Shaw, with a $48.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism consist of Israel Englander’s Millennium Management, Clint Carlson’s Carlson Capital and Renaissance Technologies. In terms of the portfolio weights assigned to each position Voleon Capital allocated the biggest weight to Texas Capital Bancshares Inc (NASDAQ:TCBI), around 9.97% of its 13F portfolio. Carlson Capital is also relatively very bullish on the stock, dishing out 0.84 percent of its 13F equity portfolio to TCBI.
Now, key hedge funds were leading the bulls’ herd. CaaS Capital, managed by Frank Fu, established the most outsized position in Texas Capital Bancshares Inc (NASDAQ:TCBI). CaaS Capital had $55.9 million invested in the company at the end of the quarter. Clint Carlson’s Carlson Capital also made a $22.5 million investment in the stock during the quarter. The other funds with brand new TCBI positions are Chuck Royce’s Royce & Associates, Ken Griffin’s Citadel Investment Group, and Brandon Haley’s Holocene Advisors.
Let’s also examine hedge fund activity in other stocks similar to Texas Capital Bancshares Inc (NASDAQ:TCBI). We will take a look at Altra Industrial Motion Corp. (NASDAQ:AIMC), First Hawaiian, Inc. (NASDAQ:FHB), Hillenbrand, Inc. (NYSE:HI), LivePerson, Inc. (NASDAQ:LPSN), ChemoCentryx Inc (NASDAQ:CCXI), National Vision Holdings, Inc. (NASDAQ:EYE), and Cloudera, Inc. (NYSE:CLDR). This group of stocks’ market caps match TCBI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AIMC | 18 | 34178 | 3 |
| FHB | 19 | 174114 | 5 |
| HI | 15 | 17557 | 2 |
| LPSN | 31 | 193585 | -4 |
| CCXI | 20 | 385704 | -3 |
| EYE | 24 | 285800 | 0 |
| CLDR | 30 | 865678 | 1 |
| Average | 22.4 | 279517 | 0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.4 hedge funds with bullish positions and the average amount invested in these stocks was $280 million. That figure was $300 million in TCBI’s case. LivePerson, Inc. (NASDAQ:LPSN) is the most popular stock in this table. On the other hand Hillenbrand, Inc. (NYSE:HI) is the least popular one with only 15 bullish hedge fund positions. Texas Capital Bancshares Inc (NASDAQ:TCBI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TCBI is 83.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and beat the market again by 6 percentage points. Unfortunately TCBI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TCBI were disappointed as the stock returned -9.5% since the end of March (through 7/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Texas Capital Bancshares Inc (NASDAQ:TCBI)
Follow Texas Capital Bancshares Inc (NASDAQ:TCBI)
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Disclosure: None. This article was originally published at Insider Monkey.
