Before we spend countless hours researching a company, we’d like to analyze what insiders, hedge funds and billionaire investors think of the stock first. We would like to do so because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Texas Capital Bancshares Inc (NASDAQ:TCBI).
Is Texas Capital Bancshares Inc (NASDAQ:TCBI) a healthy stock for your portfolio? The best stock pickers are becoming more confident. The number of long hedge fund bets rose by 4 lately. Our calculations also showed that tcbi isn’t among the 30 most popular stocks among hedge funds. TCBI was in 26 hedge funds’ portfolios at the end of December. There were 22 hedge funds in our database with TCBI holdings at the end of the previous quarter.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 32 percentage points since May 2014 through March 12, 2019 (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.
Let’s review the new hedge fund action regarding Texas Capital Bancshares Inc (NASDAQ:TCBI).
How have hedgies been trading Texas Capital Bancshares Inc (NASDAQ:TCBI)?
At Q4’s end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the previous quarter. By comparison, 10 hedge funds held shares or bullish call options in TCBI a year ago. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
Among these funds, Citadel Investment Group held the most valuable stake in Texas Capital Bancshares Inc (NASDAQ:TCBI), which was worth $37.9 million at the end of the third quarter. On the second spot was D E Shaw which amassed $29.9 million worth of shares. Moreover, Renaissance Technologies, Two Sigma Advisors, and Basswood Capital were also bullish on Texas Capital Bancshares Inc (NASDAQ:TCBI), allocating a large percentage of their portfolios to this stock.
Now, key hedge funds have been driving this bullishness. Two Sigma Advisors, managed by John Overdeck and David Siegel, assembled the largest position in Texas Capital Bancshares Inc (NASDAQ:TCBI). Two Sigma Advisors had $21.5 million invested in the company at the end of the quarter. Matthew Lindenbaum’s Basswood Capital also made a $18.8 million investment in the stock during the quarter. The following funds were also among the new TCBI investors: Jeffrey Hinkle’s Shoals Capital Management, Cliff Asness’s AQR Capital Management, and Chuck Royce’s Royce & Associates.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Texas Capital Bancshares Inc (NASDAQ:TCBI) but similarly valued. These stocks are Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), BRP Inc. (NASDAQ:DOOO), FTI Consulting, Inc. (NYSE:FCN), and Hilton Grand Vacations Inc. (NYSE:HGV). This group of stocks’ market values are closest to TCBI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SBGI | 33 | 378016 | 2 |
| DOOO | 11 | 121922 | -5 |
| FCN | 16 | 116498 | -2 |
| HGV | 28 | 705198 | 1 |
| Average | 22 | 330409 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $330 million. That figure was $241 million in TCBI’s case. Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) is the most popular stock in this table. On the other hand BRP Inc. (NASDAQ:DOOO) is the least popular one with only 11 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 calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on TCBI, though not to the same extent, as the stock returned 22.6% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
