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. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. 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 1st Source Corporation (NASDAQ:SRCE) .
1st Source Corporation (NASDAQ:SRCE) has experienced a decrease in hedge fund sentiment lately. There were 8 hedge funds in our database with SRCE positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Express, Inc. (NYSE:EXPR), Isle of Capri Casinos (NASDAQ:ISLE), and National CineMedia, Inc. (NASDAQ:NCMI) to gather more data points.
Follow 1St Source Corp (NASDAQ:SRCE)
Follow 1St Source Corp (NASDAQ:SRCE)
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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Keeping this in mind, let’s analyze the new action encompassing 1st Source Corporation (NASDAQ:SRCE).
What does the smart money think about 1st Source Corporation (NASDAQ:SRCE)?
Heading into the fourth quarter of 2016, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the second quarter of 2016. On the other hand, there were a total of 6 hedge funds with a bullish position in SRCE at the beginning of this year. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, has the largest position in 1st Source Corporation (NASDAQ:SRCE), worth close to $3.4 million, corresponding to less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is AQR Capital Management, led by Cliff Asness, which holds a $1.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish contain Roger Ibbotson’s Zebra Capital Management, Ken Griffin’s Citadel Investment Group and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Because 1st Source Corporation (NASDAQ:SRCE) has witnessed a decline in interest from the smart money, it’s safe to say that there exists a select few fund managers who were dropping their full holdings in the third quarter. Interestingly, Israel Englander’s Millennium Management said goodbye to the largest investment of the 700 funds watched by Insider Monkey, comprising an estimated $0.9 million in stock, and Neil Chriss’s Hutchin Hill Capital was right behind this move, as the fund dropped about $0.4 million worth of shares.
Let’s check out hedge fund activity in other stocks similar to 1st Source Corporation (NASDAQ:SRCE). We will take a look at Express, Inc. (NYSE:EXPR), Isle of Capri Casinos (NASDAQ:ISLE), National CineMedia, Inc. (NASDAQ:NCMI), and Helix Energy Solutions Group Inc. (NYSE:HLX). This group of stocks’ market valuations resemble SRCE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EXPR | 26 | 162962 | 3 |
| ISLE | 22 | 220166 | 0 |
| NCMI | 12 | 66835 | -1 |
| HLX | 19 | 147517 | 1 |
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $149 million. That figure was $8 million in SRCE’s case. Express, Inc. (NYSE:EXPR) is the most popular stock in this table. On the other hand National CineMedia, Inc. (NASDAQ:NCMI) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks 1st Source Corporation (NASDAQ:SRCE) is even less popular than NCMI. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
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Disclosure: None
