It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 27.5% in 2019 (through the end of November). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same 11-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. 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 Southern First Bancshares, Inc. (NASDAQ:SFST).
Southern First Bancshares, Inc. (NASDAQ:SFST) shareholders have witnessed a decrease in support from the world’s most elite money managers recently. SFST was in 5 hedge funds’ portfolios at the end of the third quarter of 2019. There were 7 hedge funds in our database with SFST holdings at the end of the previous quarter. Our calculations also showed that SFST 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.
Today there are dozens of metrics market participants put to use to value their stock investments. Some of the less utilized metrics are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the best hedge fund managers can beat the market by a very impressive margin (see the details here).
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to view the key hedge fund action surrounding Southern First Bancshares, Inc. (NASDAQ:SFST).
Hedge fund activity in Southern First Bancshares, Inc. (NASDAQ:SFST)
At Q3’s end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from the previous quarter. On the other hand, there were a total of 7 hedge funds with a bullish position in SFST a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Castine Capital Management held the most valuable stake in Southern First Bancshares, Inc. (NASDAQ:SFST), which was worth $10 million at the end of the third quarter. On the second spot was Elizabeth Park Capital Management which amassed $6.7 million worth of shares. Renaissance Technologies, Mendon Capital Advisors, and EJF Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Castine Capital Management allocated the biggest weight to Southern First Bancshares, Inc. (NASDAQ:SFST), around 2.72% of its 13F portfolio. Elizabeth Park Capital Management is also relatively very bullish on the stock, dishing out 2.63 percent of its 13F equity portfolio to SFST.
Due to the fact that Southern First Bancshares, Inc. (NASDAQ:SFST) has experienced a decline in interest from the smart money, it’s safe to say that there exists a select few funds who sold off their full holdings in the third quarter. Interestingly, Matthew Lindenbaum’s Basswood Capital sold off the largest stake of all the hedgies followed by Insider Monkey, comprising an estimated $0.9 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund cut about $0.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Southern First Bancshares, Inc. (NASDAQ:SFST). These stocks are Alphatec Holdings Inc (NASDAQ:ATEC), Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL), Alerus Financial Corporation (NASDAQ:ALRS), and The First Bancorp, Inc. (NASDAQ:FNLC). This group of stocks’ market caps resemble SFST’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ATEC | 8 | 34122 | 3 |
| AOSL | 14 | 45381 | 4 |
| ALRS | 3 | 6849 | 3 |
| FNLC | 1 | 6125 | 0 |
| Average | 6.5 | 23119 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $33 million in SFST’s case. Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) is the most popular stock in this table. On the other hand The First Bancorp, Inc. (NASDAQ:FNLC) is the least popular one with only 1 bullish hedge fund positions. Southern First Bancshares, Inc. (NASDAQ:SFST) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on SFST, though not to the same extent, as the stock returned 7.5% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
