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. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of Umpqua Holdings Corp (NASDAQ:UMPQ) based on that data.
Is Umpqua Holdings Corp (NASDAQ:UMPQ) a bargain? Investors who are in the know are in a bearish mood. The number of bullish hedge fund positions shrunk by 7 lately. Our calculations also showed that UMPQ 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).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Ken Fisher of Fisher Asset 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. Keeping this in mind we’re going to take a peek at the latest hedge fund action regarding Umpqua Holdings Corp (NASDAQ:UMPQ).
What does smart money think about Umpqua Holdings Corp (NASDAQ:UMPQ)?
At Q4’s end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -30% from the third quarter of 2019. On the other hand, there were a total of 20 hedge funds with a bullish position in UMPQ a year ago. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
The largest stake in Umpqua Holdings Corp (NASDAQ:UMPQ) was held by Fisher Asset Management, which reported holding $52.1 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $39.3 million position. Other investors bullish on the company included AQR Capital Management, Millennium Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position EJF Capital allocated the biggest weight to Umpqua Holdings Corp (NASDAQ:UMPQ), around 2.35% of its 13F portfolio. Forest Hill Capital is also relatively very bullish on the stock, earmarking 1.49 percent of its 13F equity portfolio to UMPQ.
Seeing as Umpqua Holdings Corp (NASDAQ:UMPQ) has experienced a decline in interest from the smart money, logic holds that there lies a certain “tier” of fund managers who were dropping their full holdings by the end of the third quarter. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP cut the largest stake of the 750 funds monitored by Insider Monkey, comprising close to $4.5 million in stock. Ryan Tolkin (CIO)’s fund, Schonfeld Strategic Advisors, also cut its stock, about $2.5 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 7 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Umpqua Holdings Corp (NASDAQ:UMPQ) but similarly valued. We will take a look at Sanderson Farms, Inc. (NASDAQ:SAFM), Globant SA (NYSE:GLOB), Selective Insurance Group, Inc. (NASDAQ:SIGI), and United Therapeutics Corporation (NASDAQ:UTHR). This group of stocks’ market caps match UMPQ’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SAFM | 36 | 700510 | 12 |
| GLOB | 18 | 52725 | 1 |
| SIGI | 25 | 111114 | -1 |
| UTHR | 36 | 1137929 | 3 |
| Average | 28.75 | 500570 | 3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $501 million. That figure was $235 million in UMPQ’s case. Sanderson Farms, Inc. (NASDAQ:SAFM) is the most popular stock in this table. On the other hand Globant SA (NYSE:GLOB) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Umpqua Holdings Corp (NASDAQ:UMPQ) is even less popular than GLOB. Hedge funds dodged a bullet by taking a bearish stance towards UMPQ. Our calculations showed that the top 20 most popular hedge fund stocks 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 managed to beat the market by 5.5 percentage points. Unfortunately UMPQ wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); UMPQ investors were disappointed as the stock returned -40.3% 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 so far 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.
