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Hedge Funds Are Crazy About Prosperity Bancshares, Inc. (NYSE:PB) – Commerce Bancshares, Inc. (NASDAQ:CBSH), UMB Financial Corporation (NASDAQ:UMBF)

Is Prosperity Bancshares, Inc. (NYSE:PB) a great investment now? Money managers are getting more bullish. The number of long hedge fund positions increased by 1 lately.

Prosperity Bancshares, Inc. (NYSE:PB)

In the eyes of most traders, hedge funds are assumed to be worthless, outdated financial vehicles of years past. While there are over 8000 funds trading at present, we look at the upper echelon of this group, around 450 funds. Most estimates calculate that this group has its hands on most of the hedge fund industry’s total asset base, and by watching their highest performing equity investments, we have revealed a few investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).

Equally as important, bullish insider trading sentiment is another way to break down the stock market universe. As the old adage goes: there are plenty of reasons for a bullish insider to sell shares of his or her company, but only one, very clear reason why they would behave bullishly. Plenty of empirical studies have demonstrated the useful potential of this method if piggybackers know what to do (learn more here).

Now, we’re going to take a look at the latest action encompassing Prosperity Bancshares, Inc. (NYSE:PB).

What have hedge funds been doing with Prosperity Bancshares, Inc. (NYSE:PB)?

Heading into 2013, a total of 14 of the hedge funds we track were bullish in this stock, a change of 8% from the third quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully.

When looking at the hedgies we track, Ken Fisher’s Fisher Asset Management had the largest position in Prosperity Bancshares, Inc. (NYSE:PB), worth close to $25 million, accounting for 0.1% of its total 13F portfolio. Coming in second is David Dreman of Dreman Value Management, with a $21 million position; 0.1% of its 13F portfolio is allocated to the company. Some other peers that hold long positions include Jim Simons’s Renaissance Technologies, Cliff Asness’s AQR Capital Management and Israel Englander’s Millennium Management.

Consequently, some big names were leading the bulls’ herd. Hutchin Hill Capital, managed by Neil Chriss, assembled the most valuable position in Prosperity Bancshares, Inc. (NYSE:PB). Hutchin Hill Capital had 1 million invested in the company at the end of the quarter. Steven Cohen’s SAC Capital Advisors also initiated a $1 million position during the quarter. The other funds with new positions in the stock are Glenn Russell Dubin’s Highbridge Capital Management, Mike Vranos’s Ellington, and Andy Redleaf’s Whitebox Advisors.

What have insiders been doing with Prosperity Bancshares, Inc. (NYSE:PB)?

Insider buying is best served when the company in question has seen transactions within the past 180 days. Over the last half-year time frame, Prosperity Bancshares, Inc. (NYSE:PB) has experienced 1 unique insiders purchasing, and 3 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Prosperity Bancshares, Inc. (NYSE:PB). These stocks are Texas Capital Bancshares Inc (NASDAQ:TCBI), BOK Financial Corporation (NASDAQ:BOKF), Cullen/Frost Bankers, Inc. (NYSE:CFR), Commerce Bancshares, Inc. (NASDAQ:CBSH), and UMB Financial Corporation (NASDAQ:UMBF). This group of stocks are the members of the regional – southwest banks industry and their market caps are similar to PB’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Texas Capital Bancshares Inc (NASDAQ:TCBI) 8 1 5
BOK Financial Corporation (NASDAQ:BOKF) 10 0 5
Cullen/Frost Bankers, Inc. (NYSE:CFR) 7 0 5
Commerce Bancshares, Inc. (NASDAQ:CBSH) 9 1 9
UMB Financial Corporation (NASDAQ:UMBF) 4 1 5

With the results shown by our strategies, retail investors must always monitor hedge fund and insider trading sentiment, and Prosperity Bancshares, Inc. (NYSE:PB) is no exception.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.

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