We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (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. Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 835 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about 1st Source Corporation (NASDAQ:SRCE).
Is 1st Source Corporation (NASDAQ:SRCE) a first-rate investment right now? The smart money is becoming hopeful. The number of bullish hedge fund positions moved up by 1 in recent months. Our calculations also showed that SRCE 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). SRCE was in 10 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 9 hedge funds in our database with SRCE holdings at the end of the previous quarter.
Paul Marshall of Marshall Wace
We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. 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 take a glance at the new hedge fund action regarding 1st Source Corporation (NASDAQ:SRCE).
How are hedge funds trading 1st Source Corporation (NASDAQ:SRCE)?
At Q4’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SRCE over the last 18 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in 1st Source Corporation (NASDAQ:SRCE), which was worth $18.4 million at the end of the third quarter. On the second spot was Millennium Management which amassed $5.5 million worth of shares. AQR Capital Management, 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 ExodusPoint Capital allocated the biggest weight to 1st Source Corporation (NASDAQ:SRCE), around 0.02% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to SRCE.
As aggregate interest increased, some big names were leading the bulls’ herd. ExodusPoint Capital, managed by Michael Gelband, assembled the biggest position in 1st Source Corporation (NASDAQ:SRCE). ExodusPoint Capital had $1 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $0 million position during the quarter.
Let’s check out hedge fund activity in other stocks similar to 1st Source Corporation (NASDAQ:SRCE). We will take a look at Aphria Inc. (NYSE:APHA), SunPower Corporation (NASDAQ:SPWR), Conduent Incorporated (NYSE:CNDT), and Brookline Bancorp, Inc. (NASDAQ:BRKL). This group of stocks’ market values are similar to SRCE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| APHA | 9 | 16714 | 3 |
| SPWR | 15 | 54412 | -2 |
| CNDT | 26 | 421360 | -6 |
| BRKL | 11 | 66496 | 0 |
| Average | 15.25 | 139746 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $140 million. That figure was $37 million in SRCE’s case. Conduent Incorporated (NYSE:CNDT) is the most popular stock in this table. On the other hand Aphria Inc. (NYSE:APHA) is the least popular one with only 9 bullish hedge fund positions. 1st Source Corporation (NASDAQ:SRCE) 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 SRCE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SRCE investors were disappointed as the stock returned -34.5% 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.
