Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Hedge fund interest in Triumph Bancorp Inc (NASDAQ:TBK) shares was flat during the third quarter. This is usually a negative indicator. 6 hedge funds that we track owned the stock on September 30, same as on June 30. At the end of this article we will also compare TBK to other stocks including Peoples Utah Bancorp (NASDAQ:PUB), Calix Inc (NYSE:CALX), and Ares Commercial Real Estate Corp (NYSE:ACRE) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
vipman/Shutterstock.com
What does the smart money think about Triumph Bancorp Inc (NASDAQ:TBK)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in TBK heading into this year, so hedge fund ownership of the stock has dipped slightly. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Matthew Lindenbaum’s Basswood Capital has the largest position in Triumph Bancorp Inc (NASDAQ:TBK), worth close to $17.3 million. Coming in second is Joshua Nash of Ulysses Management, which holds a $4.1 million position. Remaining peers that are bullish comprise Anton Schutz’s Mendon Capital Advisors, Renaissance Technologies, one of the largest hedge funds in the world, and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that Ulysses Management is among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.
We view hedge fund activity in the stock as unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Springbok Capital).
Let’s also examine hedge fund activity in other stocks similar to Triumph Bancorp Inc (NASDAQ:TBK). We will take a look at Peoples Utah Bancorp (NASDAQ:PUB), Calix Inc (NYSE:CALX), Ares Commercial Real Estate Corp (NYSE:ACRE), and Barrett Business Services, Inc. (NASDAQ:BBSI). This group of stocks’ market values resemble TBK’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PUB | 4 | 6307 | 0 |
| CALX | 13 | 76897 | -2 |
| ACRE | 10 | 9905 | 2 |
| BBSI | 4 | 12278 | -4 |
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $24 million in TBK’s case. Calix Inc (NYSE:CALX) is the most popular stock in this table. On the other hand Peoples Utah Bancorp (NASDAQ:PUB) is the least popular one with only 4 bullish hedge fund positions. Triumph Bancorp Inc (NASDAQ:TBK) 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. In this regard CALX might be a better candidate to consider taking a long position in.
Disclosure: None