Is UMB Financial Corporation (UMBF) a Good Stock to Buy?

Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze UMB Financial Corporation (NASDAQ:UMBF) from the perspective of those successful funds.

Is UMB Financial Corporation (NASDAQ:UMBF) an exceptional investment now? Money managers are surely in a bullish mood. The number of long hedge fund positions inched up by 1 in recent months. UMBF was in 9 hedge funds’ portfolios at the end of September. There were 8 hedge funds in our database with UMBF holdings at the end of the previous 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 Sarepta Therapeutics Inc (NASDAQ:SRPT), Air Lease Corp (NYSE:AL), and Vector Group Ltd (NYSE:VGR) to gather more data points.

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.

What does the smart money think about UMB Financial Corporation (NASDAQ:UMBF)?

At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, up by 13% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in UMBF heading into this year. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Fisher Asset Management, led by Ken Fisher, holds the most valuable position in UMB Financial Corporation (NASDAQ:UMBF). Fisher Asset Management has a $44.1 million position in the stock. Sitting at the No. 2 spot is Third Avenue Management, led by Martin Whitman, holding a $8.4 million position. Other peers that are bullish encompass Renaissance Technologies, one of the largest hedge funds in the world, Sharif Siddiqui’s Alpenglow Capital and Israel Englander’s Millennium Management. 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.

Now, key hedge funds were breaking ground themselves. Alpenglow Capital, led by Sharif Siddiqui, initiated the most outsized position in UMB Financial Corporation (NASDAQ:UMBF). Alpenglow Capital had $3.6 million invested in the company at the end of the quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as UMB Financial Corporation (NASDAQ:UMBF) but similarly valued. We will take a look at Sarepta Therapeutics Inc (NASDAQ:SRPT), Air Lease Corp (NYSE:AL), Vector Group Ltd (NYSE:VGR), and Masimo Corporation (NASDAQ:MASI). This group of stocks’ market values match UMBF’s market value.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $434 million. That figure was $64 million in UMBF’s case. Sarepta Therapeutics Inc (NASDAQ:SRPT) is the most popular stock in this table. On the other hand Vector Group Ltd (NYSE:VGR) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks UMB Financial Corporation (NASDAQ:UMBF) is even less popular than VGR. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

Disclosure: None