“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on IBERIABANK Corporation (NASDAQ:IBKC) in order to identify whether reputable and successful top money managers continue to believe in its potential.
IBERIABANK Corporation (NASDAQ:IBKC) shareholders have witnessed a decrease in enthusiasm from smart money recently. Our calculations also showed that IBKC 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Israel Englander of Millennium 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 take a gander at the latest hedge fund action surrounding IBERIABANK Corporation (NASDAQ:IBKC).
Hedge fund activity in IBERIABANK Corporation (NASDAQ:IBKC)
At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -24% from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in IBKC a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in IBERIABANK Corporation (NASDAQ:IBKC) was held by Citadel Investment Group, which reported holding $63.5 million worth of stock at the end of September. It was followed by Millennium Management with a $20.9 million position. Other investors bullish on the company included Gillson Capital, Castine Capital Management, and Forest Hill Capital. In terms of the portfolio weights assigned to each position Castine Capital Management allocated the biggest weight to IBERIABANK Corporation (NASDAQ:IBKC), around 4.09% of its 13F portfolio. Forest Hill Capital is also relatively very bullish on the stock, setting aside 3.88 percent of its 13F equity portfolio to IBKC.
Judging by the fact that IBERIABANK Corporation (NASDAQ:IBKC) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there exists a select few funds who sold off their full holdings last quarter. Intriguingly, Matthew Lindenbaum’s Basswood Capital dropped the largest position of the “upper crust” of funds followed by Insider Monkey, worth about $4.1 million in stock. Matthew Tewksbury’s fund, Stevens Capital Management, also dropped its stock, about $2.2 million worth. These transactions are interesting, as total hedge fund interest fell by 6 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to IBERIABANK Corporation (NASDAQ:IBKC). These stocks are Outfront Media Inc (NYSE:OUT), Aerojet Rocketdyne Holdings Inc (NYSE:AJRD), The Medicines Company (NASDAQ:MDCO), and Helen of Troy Limited (NASDAQ:HELE). This group of stocks’ market valuations are similar to IBKC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OUT | 29 | 478492 | 7 |
| AJRD | 21 | 465161 | 3 |
| MDCO | 32 | 1149542 | -1 |
| HELE | 14 | 206819 | -6 |
| Average | 24 | 575004 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $575 million. That figure was $164 million in IBKC’s case. The Medicines Company (NASDAQ:MDCO) is the most popular stock in this table. On the other hand Helen of Troy Limited (NASDAQ:HELE) is the least popular one with only 14 bullish hedge fund positions. IBERIABANK Corporation (NASDAQ:IBKC) 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 IBKC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); IBKC investors were disappointed as the stock returned -3.4% 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.
