At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Horizon Bancorp (NASDAQ:HBNC) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Horizon Bancorp (NASDAQ:HBNC) has experienced an increase in hedge fund sentiment recently. HBNC was in 11 hedge funds’ portfolios at the end of the first quarter of 2020. There were 10 hedge funds in our database with HBNC holdings at the end of the previous quarter. Our calculations also showed that HBNC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s review the new hedge fund action surrounding Horizon Bancorp (NASDAQ:HBNC).
What have hedge funds been doing with Horizon Bancorp (NASDAQ:HBNC)?
At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the previous quarter. By comparison, 10 hedge funds held shares or bullish call options in HBNC a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies has the largest position in Horizon Bancorp (NASDAQ:HBNC), worth close to $12.1 million, comprising less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Millennium Management, led by Israel Englander, holding a $2.2 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish consist of Ken Griffin’s Citadel Investment Group, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Minerva Advisors allocated the biggest weight to Horizon Bancorp (NASDAQ:HBNC), around 0.34% of its 13F portfolio. Engineers Gate Manager is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to HBNC.
Consequently, key hedge funds have jumped into Horizon Bancorp (NASDAQ:HBNC) headfirst. Engineers Gate Manager, managed by Greg Eisner, initiated the biggest position in Horizon Bancorp (NASDAQ:HBNC). Engineers Gate Manager had $0.3 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $0 million position during the quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Horizon Bancorp (NASDAQ:HBNC) but similarly valued. These stocks are Viad Corp (NYSE:VVI), Ribbon Communications Inc. (NASDAQ:RBBN), MTS Systems Corporation (NASDAQ:MTSC), and Heidrick & Struggles International, Inc. (NASDAQ:HSII). This group of stocks’ market caps are closest to HBNC’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
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 $51 million. That figure was $19 million in HBNC’s case. Viad Corp (NYSE:VVI) is the most popular stock in this table. On the other hand Ribbon Communications Inc. (NASDAQ:RBBN) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Horizon Bancorp (NASDAQ:HBNC) is even less popular than RBBN. Hedge funds dodged a bullet by taking a bearish stance towards HBNC. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but managed to beat the market by 15.5 percentage points. Unfortunately HBNC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); HBNC investors were disappointed as the stock returned 9.9% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.