How do we determine whether BankUnited, Inc. (NYSE:BKU) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
BankUnited, Inc. (NYSE:BKU) has seen an increase in hedge fund interest of late. Our calculations also showed that BKU isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Steven Cohen of Point72 Asset Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s go over the new hedge fund action surrounding BankUnited, Inc. (NYSE:BKU).
What does smart money think about BankUnited, Inc. (NYSE:BKU)?
Heading into the fourth quarter of 2019, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BKU over the last 17 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in BankUnited, Inc. (NYSE:BKU) was held by Diamond Hill Capital, which reported holding $134.4 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $86 million position. Other investors bullish on the company included Millennium Management, Holocene Advisors, and Point72 Asset Management. In terms of the portfolio weights assigned to each position Diamond Hill Capital allocated the biggest weight to BankUnited, Inc. (NYSE:BKU), around 0.71% of its 13F portfolio. Cerebellum Capital is also relatively very bullish on the stock, dishing out 0.28 percent of its 13F equity portfolio to BKU.
Consequently, some big names were breaking ground themselves. Holocene Advisors, managed by Brandon Haley, initiated the largest position in BankUnited, Inc. (NYSE:BKU). Holocene Advisors had $23.5 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also initiated a $0.7 million position during the quarter. The only other fund with a brand new BKU position is Mike Vranos’s Ellington.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as BankUnited, Inc. (NYSE:BKU) but similarly valued. These stocks are Nektar Therapeutics (NASDAQ:NKTR), Evercore Inc. (NYSE:EVR), RH (NYSE:RH), and Brookfield Business Partners L.P. (NYSE:BBU). This group of stocks’ market values resemble BKU’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NKTR | 17 | 154689 | -2 |
| EVR | 29 | 339572 | 3 |
| RH | 32 | 876978 | 4 |
| BBU | 6 | 10495 | 1 |
| Average | 21 | 345434 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $345 million. That figure was $420 million in BKU’s case. RH (NYSE:RH) is the most popular stock in this table. On the other hand Brookfield Business Partners L.P. (NYSE:BBU) is the least popular one with only 6 bullish hedge fund positions. BankUnited, Inc. (NYSE:BKU) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BKU wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BKU investors were disappointed as the stock returned 5% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
