Hedge Funds Are Crazy About Capital Bank Financial Corp (CBF)

Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

Capital Bank Financial Corp (NASDAQ:CBF) was in 7 hedge funds’ portfolios at the end of the third quarter of 2016. CBF has experienced an increase in support from the world’s most successful money managers recently. There were 6 hedge funds in our database with CBF holdings at the end of the previous quarter. At the end of this article we will also compare CBF to other stocks including Yirendai Ltd – ADR (NYSE:YRD), 8×8, Inc. (NASDAQ:EGHT), and Omnicell, Inc. (NASDAQ:OMCL) to get a better sense of its popularity.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

Keeping this in mind, we’re going to take a look at the key action surrounding Capital Bank Financial Corp (NASDAQ:CBF).

Hedge fund activity in Capital Bank Financial Corp (NASDAQ:CBF)

Heading into the fourth quarter of 2016, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, up 17% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CBF over the last 5 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Millennium Management, one of the 10 largest hedge funds in the world, has the number one position in Capital Bank Financial Corp (NASDAQ:CBF), worth close to $5.7 million, comprising less than 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is AQR Capital Management, led by Cliff Asness, which holds a $4.8 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism contain Jim Simons’s Renaissance Technologies, John Overdeck and David Siegel’s Two Sigma Advisors and D. E. Shaw’s D E Shaw. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Prospector Partners, led by John D. Gillespie, established the most valuable position in Capital Bank Financial Corp (NASDAQ:CBF). According to its latest 13F filing, the fund had $0.8 million invested in the company at the end of the quarter.

Let’s go over hedge fund activity in other stocks similar to Capital Bank Financial Corp (NASDAQ:CBF). We will take a look at Yirendai Ltd – ADR (NYSE:YRD), 8×8, Inc. (NASDAQ:EGHT), Omnicell, Inc. (NASDAQ:OMCL), and Hope Bancorp Inc (NASDAQ:HOPE). This group of stocks’ market values match CBF’s market value.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $17 million in CBF’s case. 8×8, Inc. (NASDAQ:EGHT) is the most popular stock in this table. On the other hand Yirendai Ltd – ADR (NYSE:YRD) is the least popular one with only 5 bullish hedge fund positions. Capital Bank Financial Corp (NASDAQ:CBF) 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 EGHT might be a better candidate to consider taking a long position in.

Disclosure: None