Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth depends on it. Regardless of the various methods used by elite investors like David Tepper and Dan Loeb, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.
Hedge fund interest in International Bancshares Corp (NASDAQ:IBOC) 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 IBOC to other stocks including NuStar Energy L.P. (NYSE:NS), SailPoint Technologies Holdings, Inc. (NYSE:SAIL), and White Mountains Insurance Group Ltd (NYSE:WTM) to get a better sense of its popularity.
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 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 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 analyze the fresh hedge fund action surrounding International Bancshares Corp (NASDAQ:IBOC).
How have hedgies been trading International Bancshares Corp (NASDAQ:IBOC)?
At Q3’s end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, representing no change from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards IBOC over the last 13 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
The largest stake in International Bancshares Corp (NASDAQ:IBOC) was held by Polaris Capital Management, which reported holding $53 million worth of stock at the end of September. It was followed by Millennium Management with a $49.4 million position. Other investors bullish on the company included Balyasny Asset Management, Azora Capital, and Arrowstreet Capital.
Because International Bancshares Corp (NASDAQ:IBOC) has experienced falling interest from the smart money, we can see that there is a sect of hedgies who were dropping their full holdings in the third quarter. Intriguingly, John Overdeck and David Siegel’s Two Sigma Advisors sold off the biggest stake of the “upper crust” of funds watched by Insider Monkey, worth an estimated $0.3 million in stock, and Matthew Tewksbury’s Stevens Capital Management was right behind this move, as the fund dumped about $0.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as International Bancshares Corp (NASDAQ:IBOC) but similarly valued. These stocks are NuStar Energy L.P. (NYSE:NS), SailPoint Technologies Holdings, Inc. (NYSE:SAIL), White Mountains Insurance Group Ltd (NYSE:WTM), and KBR, Inc. (NYSE:KBR). This group of stocks’ market valuations resemble IBOC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NS | 2 | 2988 | 0 |
| SAIL | 17 | 283382 | 2 |
| WTM | 16 | 188873 | 3 |
| KBR | 19 | 490619 | -2 |
| Average | 13.5 | 241466 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $241 million. That figure was $188 million in IBOC’s case. KBR, Inc. (NYSE:KBR) is the most popular stock in this table. On the other hand NuStar Energy L.P. (NYSE:NS) is the least popular one with only 2 bullish hedge fund positions. International Bancshares Corp (NASDAQ:IBOC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard KBR might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
