The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Allegiance Bancshares, Inc. (NASDAQ:ABTX) based on those filings.
Allegiance Bancshares, Inc. (NASDAQ:ABTX) was in 6 hedge funds’ portfolios at the end of the first quarter of 2020. ABTX has experienced a decrease in hedge fund sentiment recently. There were 7 hedge funds in our database with ABTX positions at the end of the previous quarter. Our calculations also showed that ABTX 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s check out the fresh hedge fund action surrounding Allegiance Bancshares, Inc. (NASDAQ:ABTX).
How have hedgies been trading Allegiance Bancshares, Inc. (NASDAQ:ABTX)?
At the end of the first quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. On the other hand, there were a total of 7 hedge funds with a bullish position in ABTX a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Royce & Associates was the largest shareholder of Allegiance Bancshares, Inc. (NASDAQ:ABTX), with a stake worth $4 million reported as of the end of September. Trailing Royce & Associates was Winton Capital Management, which amassed a stake valued at $0.7 million. EJF Capital, PDT Partners, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position EJF Capital allocated the biggest weight to Allegiance Bancshares, Inc. (NASDAQ:ABTX), around 0.14% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.06 percent of its 13F equity portfolio to ABTX.
Judging by the fact that Allegiance Bancshares, Inc. (NASDAQ:ABTX) has faced a decline in interest from hedge fund managers, we can see that there lies a certain “tier” of hedge funds who sold off their entire stakes last quarter. Interestingly, Israel Englander’s Millennium Management sold off the biggest position of the 750 funds monitored by Insider Monkey, comprising about $0.8 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also said goodbye to its stock, about $0.3 million worth. These transactions are important to note, as total hedge fund interest dropped by 1 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Allegiance Bancshares, Inc. (NASDAQ:ABTX) but similarly valued. These stocks are Ennis, Inc. (NYSE:EBF), Athersys, Inc. (NASDAQ:ATHX), Solar Capital Ltd. (NASDAQ:SLRC), and ACCO Brands Corporation (NYSE:ACCO). This group of stocks’ market caps resemble ABTX’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 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $6 million in ABTX’s case. ACCO Brands Corporation (NYSE:ACCO) is the most popular stock in this table. On the other hand Athersys, Inc. (NASDAQ:ATHX) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Allegiance Bancshares, Inc. (NASDAQ:ABTX) is even less popular than ATHX. Hedge funds dodged a bullet by taking a bearish stance towards ABTX. 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 13.9% in 2020 through June 10th but managed to beat the market by 14.2 percentage points. Unfortunately ABTX wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); ABTX investors were disappointed as the stock returned 12.5% during the second quarter (through June 10th) 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.