“The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak,” are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards IBERIABANK Corporation (NASDAQ:IBKC) and see how it was affected.
IBERIABANK Corporation (NASDAQ:IBKC) investors should be aware of a decrease in activity from the world’s largest hedge funds of late. IBKC was in 25 hedge funds’ portfolios at the end of June. There were 26 hedge funds in our database with IBKC positions at the end of the previous quarter. Our calculations also showed that IBKC isn’t among the 30 most popular stocks among hedge funds (view the video below).
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 our short portfolio.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a look at the recent hedge fund action regarding IBERIABANK Corporation (NASDAQ:IBKC).
How have hedgies been trading IBERIABANK Corporation (NASDAQ:IBKC)?
Heading into the third quarter of 2019, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in IBKC a year ago. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, Citadel Investment Group held the most valuable stake in IBERIABANK Corporation (NASDAQ:IBKC), which was worth $73.1 million at the end of the second quarter. On the second spot was Millennium Management which amassed $35.8 million worth of shares. Moreover, Gillson Capital, D E Shaw, and Castine Capital Management were also bullish on IBERIABANK Corporation (NASDAQ:IBKC), allocating a large percentage of their portfolios to this stock.
Since IBERIABANK Corporation (NASDAQ:IBKC) has experienced falling interest from the smart money, it’s safe to say that there lies a certain “tier” of hedgies that slashed their full holdings in the second quarter. Intriguingly, Anton Schutz’s Mendon Capital Advisors said goodbye to the biggest position of the 750 funds monitored by Insider Monkey, worth close to $5.7 million in stock, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital was right behind this move, as the fund dropped about $1.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 1 funds in the second quarter.
Let’s check out hedge fund activity in other stocks similar to IBERIABANK Corporation (NASDAQ:IBKC). These stocks are Lancaster Colony Corporation (NASDAQ:LANC), United States Cellular Corporation (NYSE:USM), PNM Resources, Inc. (NYSE:PNM), and Globus Medical Inc (NYSE:GMED). This group of stocks’ market caps match IBKC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LANC | 18 | 214816 | -6 |
| USM | 15 | 177104 | 1 |
| PNM | 13 | 348669 | -1 |
| GMED | 19 | 170998 | -5 |
| Average | 16.25 | 227897 | -2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $228 million. That figure was $193 million in IBKC’s case. Globus Medical Inc (NYSE:GMED) is the most popular stock in this table. On the other hand PNM Resources, Inc. (NYSE:PNM) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks IBERIABANK Corporation (NASDAQ:IBKC) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately IBKC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on IBKC were disappointed as the stock returned 0.2% during the third 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 many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
