Should You Avoid IBERIABANK Corporation (IBKC)?

The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at IBERIABANK Corporation (NASDAQ:IBKC) from the perspective of those elite funds.

Is IBERIABANK Corporation (NASDAQ:IBKC) a splendid investment right now? Investors who are in the know are becoming less confident. The number of long hedge fund bets were trimmed by 2 recently. It is important to note that the shares of IBERIABANK Corporation (NASDAQ:IBKC) were down 14.69% during the third quarter, following a similar path as that of the hedge fund sentiment.

In order to find out more about the hedge fund behavior, we will compare IBERIABANK Corporation (NASDAQ:IBKC) to other stocks, including Huntsman Corporation (NYSE:HUN), Nu Skin Enterprises, Inc. (NYSE:NUS), and Big Lots, Inc. (NYSE:BIG) to get a better sense of its popularity.

Today, there are dozens of methods market participants can use to assess stocks. A pair of the most useful methods are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the top hedge fund managers can trounce the S&P 500 by a superb amount (see the details here).

Now, let’s review the latest action regarding IBERIABANK Corporation (NASDAQ:IBKC).

How have hedgies been trading IBERIABANK Corporation (NASDAQ:IBKC)?

At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decrease of 20% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the biggest position in IBERIABANK Corporation (NASDAQ:IBKC). Citadel Investment Group has a $49 million position in the stock, comprising less than 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Mark Lee of Forest Hill Capital, with a $45.1 million position; the fund has 4.3% of its 13F portfolio invested in the stock. Remaining peers that are bullish encompass Dmitry Balyasny’s Balyasny Asset Management, Israel Englander’s Millennium Management, and Lee Munder’s Lee Munder Capital Group.

Judging by the fact that IBERIABANK Corporation (NASDAQ:IBKC) has faced a declination in interest from hedge fund managers, logic holds that there is a sect of hedgies that decided to sell off their entire stakes in the third quarter. It’s worth mentioning that Sharif Siddiqui’s Alpenglow Capital sold off the biggest investment of all the hedgies monitored by Insider Monkey, valued at an estimated $6.2 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund cut about $0.3 million worth of shares. These bearish behaviors are important to note, as total hedge fund interest dropped by 2 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as IBERIABANK Corporation (NASDAQ:IBKC) but similarly valued. We will take a look at Huntsman Corporation (NYSE:HUN), Nu Skin Enterprises, Inc. (NYSE:NUS), Big Lots, Inc. (NYSE:BIG), and CLARCOR Inc. (NYSE:CLC). All of these stocks’ market caps are closest to IBERIABANK Corporation (NASDAQ:IBKC)’s market cap.

As you can see, these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $261 million. That figure was $189 million in IBERIABANK Corporation (NASDAQ:IBKC)’s case. Huntsman Corporation (NYSE:HUN) is the most popular stock in this table. On the other hand, CLARCOR Inc. (NYSE:CLC) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks, IBERIABANK Corporation (NASDAQ:IBKC) is even less popular than CLARCOR Inc. (NYSE:CLC). 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.