Was The Smart Money Right About First Busey Corporation (BUSE)?

Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In his article we will share the smart money’s sentiment towards First Busey Corporation (NASDAQ:BUSE).

First Busey Corporation (NASDAQ:BUSE) shareholders have witnessed an increase in enthusiasm from smart money of late. BUSE was in 12 hedge funds’ portfolios at the end of December. There were 11 hedge funds in our database with BUSE positions at the end of the previous quarter. Our calculations also showed that BUSE 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).

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 was able to identify in advance a select group of hedge fund holdings that 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.

Matthew Lindenbaum of Basswood Capital

We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with 77% accuracy, so we check out his stock picks. A former hedge fund manager is pitching the “next Amazon” in this video; again we are listening. 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. Now let’s take a glance at the new hedge fund action encompassing First Busey Corporation (NASDAQ:BUSE).

How have hedgies been trading First Busey Corporation (NASDAQ:BUSE)?

At the end of the fourth quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in BUSE 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.

More specifically, Renaissance Technologies was the largest shareholder of First Busey Corporation (NASDAQ:BUSE), with a stake worth $28.4 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $7.1 million. Basswood Capital, Arrowstreet Capital, and Citadel Investment Group 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 Basswood Capital allocated the biggest weight to First Busey Corporation (NASDAQ:BUSE), around 0.22% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to BUSE.

Consequently, key hedge funds were breaking ground themselves. Bailard Inc, managed by Thomas Bailard, initiated the biggest position in First Busey Corporation (NASDAQ:BUSE). Bailard Inc had $0.3 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $0.2 million position during the quarter.

Let’s now review hedge fund activity in other stocks similar to First Busey Corporation (NASDAQ:BUSE). These stocks are Regenxbio Inc (NASDAQ:RGNX), Addus Homecare Corporation (NASDAQ:ADUS), Dicerna Pharmaceuticals Inc (NASDAQ:DRNA), and Cortexyme, Inc. (NASDAQ:CRTX). This group of stocks’ market valuations are similar to BUSE’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $177 million. That figure was $48 million in BUSE’s case. Dicerna Pharmaceuticals Inc (NASDAQ:DRNA) is the most popular stock in this table. On the other hand Cortexyme, Inc. (NASDAQ:CRTX) is the least popular one with only 1 bullish hedge fund positions. First Busey Corporation (NASDAQ:BUSE) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately BUSE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); BUSE investors were disappointed as the stock returned -34% 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market 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.