We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Prosperity Bancshares, Inc. (NYSE:PB).
Prosperity Bancshares, Inc. (NYSE:PB) has seen an increase in support from the world’s most elite money managers recently. Our calculations also showed that PB 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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Michael Platt of Bluecrest Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to view the new hedge fund action regarding Prosperity Bancshares, Inc. (NYSE:PB).
What does smart money think about Prosperity Bancshares, Inc. (NYSE:PB)?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in PB over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Fisher Asset Management, managed by Ken Fisher, holds the largest position in Prosperity Bancshares, Inc. (NYSE:PB). Fisher Asset Management has a $24.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Fisher Asset Management’s heels is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $19.6 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism contain Dmitry Balyasny’s Balyasny Asset Management, Renaissance Technologies and Joseph Samuels’s Islet Management. In terms of the portfolio weights assigned to each position Islet Management allocated the biggest weight to Prosperity Bancshares, Inc. (NYSE:PB), around 0.66% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, designating 0.39 percent of its 13F equity portfolio to PB.
As one would reasonably expect, key money managers were leading the bulls’ herd. Islet Management, managed by Joseph Samuels, created the biggest position in Prosperity Bancshares, Inc. (NYSE:PB). Islet Management had $5.3 million invested in the company at the end of the quarter. Gregg Moskowitz’s Interval Partners also initiated a $4.8 million position during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management, Michael Platt and William Reeves’s BlueCrest Capital Mgmt., and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s check out hedge fund activity in other stocks similar to Prosperity Bancshares, Inc. (NYSE:PB). We will take a look at Performance Food Group Company (NYSE:PFGC), Rexford Industrial Realty Inc (NYSE:REXR), Silicon Laboratories Inc. (NASDAQ:SLAB), and Crane Co. (NYSE:CR). All of these stocks’ market caps resemble PB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PFGC | 23 | 158474 | 4 |
| REXR | 17 | 68044 | 0 |
| SLAB | 19 | 71884 | 1 |
| CR | 21 | 336467 | -5 |
| Average | 20 | 158717 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $159 million. That figure was $90 million in PB’s case. Performance Food Group Company (NYSE:PFGC) is the most popular stock in this table. On the other hand Rexford Industrial Realty Inc (NYSE:REXR) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Prosperity Bancshares, Inc. (NYSE:PB) is even less popular than REXR. Hedge funds dodged a bullet by taking a bearish stance towards PB. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately PB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); PB investors were disappointed as the stock returned -0.5% during the fourth quarter (through the end of November) 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 so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
