Is South State Corporation (SSB) Worthy of Your Portfolio?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in South State Corporation (NASDAQ:SSB).

Is South State Corporation (NASDAQ:SSB) undervalued? Money managers seem to be turning less bullish. Among the funds we track, the number of bullish hedge fund positions that are disclosed in regulatory 13F filings declined by three during the third quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as RBC Bearings Incorporated (NASDAQ:ROLL), Forum Energy Technologies Inc (NYSE:FET), and The Advisory Board Company (NASDAQ:ABCO) to gather more data points.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

Keeping this in mind, we’re going to take a look at the latest action encompassing South State Corporation (NASDAQ:SSB).

How have hedgies been trading South State Corporation (NASDAQ:SSB)?

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, down by 21% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in SSB heading into this year. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Amy Minella’s Cardinal Capital has the largest position in South State Corporation (NASDAQ:SSB), worth close to $16.8 million, amounting to 0.8% of its total 13F portfolio. The second most bullish fund is Renaissance Technologies, one of the largest hedge funds in the world,, with a $10.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism include Mark Lee’s Forest Hill Capital, Israel Englander’s Millennium Management, and Matthew Lindenbaum’s Basswood Capital. 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.

Because South State Corporation (NASDAQ:SSB) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there is a sect of fund managers that slashed their positions entirely last quarter. It’s worth mentioning that Neil Chriss’ Hutchin Hill Capital sold off the largest investment of the 700 funds watched by Insider Monkey, valued at close to $4.6 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also sold off its stock, about $2.8 million worth.

Let’s now take a look at hedge fund activity in other stocks similar to South State Corporation (NASDAQ:SSB). These stocks are RBC Bearings Incorporated (NASDAQ:ROLL), Forum Energy Technologies Inc (NYSE:FET), The Advisory Board Company (NASDAQ:ABCO), and Main Street Capital Corporation (NYSE:MAIN). This group of stocks’ market valuations resemble SSB’s market valuation.

As you can see these stocks had an average of 11 funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $47 million in SSB’s case. Forum Energy Technologies Inc (NYSE:FET) is the most popular stock in this table. On the other hand Main Street Capital Corporation (NYSE:MAIN) is the least popular one with only eight funds holding shares. South State Corporation (NASDAQ:SSB) 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 FET might be a better candidate to consider taking a long position in.

Disclosure: none