It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of 4 percentage points during the first 9 months of 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in First Financial Bankshares Inc (NASDAQ:FFIN).
Is First Financial Bankshares Inc (NASDAQ:FFIN) a buy here? The best stock pickers are turning less bullish. The number of long hedge fund bets shrunk by 1 recently. Our calculations also showed that FFIN isn’t among the 30 most popular stocks among hedge funds (view the video below). FFIN was in 12 hedge funds’ portfolios at the end of June. There were 13 hedge funds in our database with FFIN positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are dozens of indicators stock market investors can use to evaluate their holdings. A couple of the most under-the-radar indicators are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the best fund managers can beat the broader indices by a very impressive amount (see the details here).
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 take a peek at the latest hedge fund action surrounding First Financial Bankshares Inc (NASDAQ:FFIN).
Hedge fund activity in First Financial Bankshares Inc (NASDAQ:FFIN)
Heading into the third quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FFIN over the last 16 quarters. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
The largest stake in First Financial Bankshares Inc (NASDAQ:FFIN) was held by Arrowstreet Capital, which reported holding $6.7 million worth of stock at the end of March. It was followed by Winton Capital Management with a $6.3 million position. Other investors bullish on the company included Balyasny Asset Management, GLG Partners, and D E Shaw.
Because First Financial Bankshares Inc (NASDAQ:FFIN) has witnessed a decline in interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few hedge funds who were dropping their full holdings in the second quarter. Intriguingly, Israel Englander’s Millennium Management cut the largest stake of all the hedgies watched by Insider Monkey, valued at an estimated $5.7 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also said goodbye to its stock, about $2.6 million worth. These moves are important to note, as total hedge fund interest was cut by 1 funds in the second quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as First Financial Bankshares Inc (NASDAQ:FFIN) but similarly valued. We will take a look at IBERIABANK Corporation (NASDAQ:IBKC), BlackBerry Limited (NYSE:BB), Blackbaud, Inc. (NASDAQ:BLKB), and MSC Industrial Direct Co Inc (NYSE:MSM). This group of stocks’ market caps are similar to FFIN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IBKC | 25 | 192698 | -1 |
| BB | 25 | 540194 | 2 |
| BLKB | 10 | 77224 | -1 |
| MSM | 16 | 75254 | 2 |
| Average | 19 | 221343 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $221 million. That figure was $31 million in FFIN’s case. IBERIABANK Corporation (NASDAQ:IBKC) is the most popular stock in this table. On the other hand Blackbaud, Inc. (NASDAQ:BLKB) is the least popular one with only 10 bullish hedge fund positions. First Financial Bankshares Inc (NASDAQ:FFIN) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on FFIN as the stock returned 8.6% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
