Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Is ServisFirst Bancshares, Inc. (NASDAQ:SFBS) going to take off soon? The best stock pickers are in a bullish mood. The number of long hedge fund bets rose by 3 recently. Our calculations also showed that SFBS isn’t among the 30 most popular stocks among hedge funds. SFBS was in 11 hedge funds’ portfolios at the end of December. There were 8 hedge funds in our database with SFBS positions at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a peek at the key hedge fund action surrounding ServisFirst Bancshares, Inc. (NASDAQ:SFBS).
How have hedgies been trading ServisFirst Bancshares, Inc. (NASDAQ:SFBS)?
Heading into the first quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in SFBS a year ago. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
The largest stake in ServisFirst Bancshares, Inc. (NASDAQ:SFBS) was held by Fisher Asset Management, which reported holding $2.7 million worth of stock at the end of December. It was followed by Royce & Associates with a $2.3 million position. Other investors bullish on the company included AQR Capital Management, GAMCO Investors, and Citadel Investment Group.
Now, some big names have jumped into ServisFirst Bancshares, Inc. (NASDAQ:SFBS) headfirst. Citadel Investment Group, managed by Ken Griffin, assembled the most outsized position in ServisFirst Bancshares, Inc. (NASDAQ:SFBS). Citadel Investment Group had $0.8 million invested in the company at the end of the quarter. Gregg Moskowitz’s Interval Partners also made a $0.5 million investment in the stock during the quarter. The following funds were also among the new SFBS investors: Benjamin A. Smith’s Laurion Capital Management and Hoon Kim’s Quantinno Capital.
Let’s now take a look at hedge fund activity in other stocks similar to ServisFirst Bancshares, Inc. (NASDAQ:SFBS). We will take a look at Dycom Industries, Inc. (NYSE:DY), KB Home (NYSE:KBH), Carpenter Technology Corporation (NYSE:CRS), and Hilltop Holdings Inc. (NYSE:HTH). This group of stocks’ market values match SFBS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DY | 18 | 125784 | -5 |
| KBH | 14 | 274581 | -3 |
| CRS | 15 | 87982 | 1 |
| HTH | 14 | 103124 | 0 |
| Average | 15.25 | 147868 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $148 million. That figure was $10 million in SFBS’s case. Dycom Industries, Inc. (NYSE:DY) is the most popular stock in this table. On the other hand KB Home (NYSE:KBH) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks ServisFirst Bancshares, Inc. (NASDAQ:SFBS) is even less popular than KBH. Hedge funds dodged a bullet by taking a bearish stance towards SFBS. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately SFBS wasn’t nearly as popular as these 15 stock (hedge fund sentiment was very bearish); SFBS investors were disappointed as the stock returned 3.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
