Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. At Insider Monkey, we pore over the filings of nearly 835 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not Simmons First National Corporation (NASDAQ:SFNC) makes for a good investment right now.
Is Simmons First National Corporation (NASDAQ:SFNC) a buy here? Hedge funds are getting less bullish. The number of bullish hedge fund bets decreased by 5 in recent months. Our calculations also showed that SFNC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). SFNC was in 6 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 11 hedge funds in our database with SFNC holdings at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Cliff Asness of AQR Capital Management
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s go over the fresh hedge fund action surrounding Simmons First National Corporation (NASDAQ:SFNC).
How are hedge funds trading Simmons First National Corporation (NASDAQ:SFNC)?
At the end of the fourth quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -45% from the third quarter of 2019. On the other hand, there were a total of 7 hedge funds with a bullish position in SFNC a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the most valuable position in Simmons First National Corporation (NASDAQ:SFNC). Arrowstreet Capital has a $16.1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is D. E. Shaw of D E Shaw, with a $6.2 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish comprise Noam Gottesman’s GLG Partners, Cliff Asness’s AQR Capital Management and Mika Toikka’s AlphaCrest Capital Management. In terms of the portfolio weights assigned to each position Arrowstreet Capital allocated the biggest weight to Simmons First National Corporation (NASDAQ:SFNC), around 0.04% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, dishing out 0.03 percent of its 13F equity portfolio to SFNC.
Since Simmons First National Corporation (NASDAQ:SFNC) has experienced bearish sentiment from hedge fund managers, we can see that there is a sect of fund managers that decided to sell off their positions entirely in the third quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group said goodbye to the largest position of all the hedgies tracked by Insider Monkey, comprising close to $4.1 million in stock. Renaissance Technologies, also said goodbye to its stock, about $0.7 million worth. These moves are interesting, as total hedge fund interest dropped by 5 funds in the third quarter.
Let’s check out hedge fund activity in other stocks similar to Simmons First National Corporation (NASDAQ:SFNC). These stocks are NeoGenomics, Inc. (NASDAQ:NEO), South Jersey Industries Inc (NYSE:SJI), Atlantic Union Bankshares Corporation (NASDAQ:AUB), and Medpace Holdings, Inc. (NASDAQ:MEDP). All of these stocks’ market caps are closest to SFNC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NEO | 12 | 48630 | -2 |
| SJI | 18 | 141726 | 4 |
| AUB | 8 | 20327 | 5 |
| MEDP | 17 | 202891 | -5 |
| Average | 13.75 | 103394 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $103 million. That figure was $25 million in SFNC’s case. South Jersey Industries Inc (NYSE:SJI) is the most popular stock in this table. On the other hand Atlantic Union Bankshares Corporation (NASDAQ:AUB) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Simmons First National Corporation (NASDAQ:SFNC) is even less popular than AUB. Hedge funds dodged a bullet by taking a bearish stance towards SFNC. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately SFNC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SFNC investors were disappointed as the stock returned -33% during the same time period 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 most of these stocks already outperformed the market so far in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
