Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards UMB Financial Corporation (NASDAQ:UMBF).
Hedge fund interest in UMB Financial Corporation (NASDAQ:UMBF) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare UMBF to other stocks including Array Biopharma Inc (NASDAQ:ARRY), First Hawaiian, Inc. (NASDAQ:FHB), and Investors Bancorp, Inc. (NASDAQ:ISBC) to get a better sense of its popularity.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to go over the new hedge fund action encompassing UMB Financial Corporation (NASDAQ:UMBF).
Hedge fund activity in UMB Financial Corporation (NASDAQ:UMBF)
At the end of the fourth quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in UMBF over the last 14 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Ken Fisher’s Fisher Asset Management has the most valuable position in UMB Financial Corporation (NASDAQ:UMBF), worth close to $22.9 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by Martin Whitman of Third Avenue Management, with a $9.2 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions contain Jim Simons’s Renaissance Technologies, Israel Englander’s Millennium Management and Noam Gottesman’s GLG Partners.
Since UMB Financial Corporation (NASDAQ:UMBF) has witnessed falling interest from the aggregate hedge fund industry, we can see that there were a few fund managers who were dropping their full holdings in the third quarter. Interestingly, Ken Griffin’s Citadel Investment Group dropped the largest position of all the hedgies tracked by Insider Monkey, worth close to $0.2 million in stock, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital was right behind this move, as the fund dumped about $0 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as UMB Financial Corporation (NASDAQ:UMBF) but similarly valued. These stocks are Array Biopharma Inc (NASDAQ:ARRY), First Hawaiian, Inc. (NASDAQ:FHB), Investors Bancorp, Inc. (NASDAQ:ISBC), and BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ). This group of stocks’ market valuations are similar to UMBF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ARRY | 31 | 787434 | 1 |
| FHB | 21 | 276809 | -7 |
| ISBC | 27 | 650714 | -6 |
| BJ | 16 | 233292 | -16 |
| Average | 23.75 | 487062 | -7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $487 million. That figure was $50 million in UMBF’s case. Array Biopharma Inc (NASDAQ:ARRY) is the most popular stock in this table. On the other hand BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks UMB Financial Corporation (NASDAQ:UMBF) is even less popular than BJ. Hedge funds dodged a bullet by taking a bearish stance towards UMBF. 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 UMBF wasn’t nearly as popular as these 15 stock (hedge fund sentiment was very bearish); UMBF investors were disappointed as the stock returned 7.9% 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.
