Do Hedge Funds Love Investors Bancorp, Inc. (ISBC)?

Last year’s fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 37.4% in 2019 (through the end of November) and outperformed the S&P 500 ETF by 9.9 percentage points. We are done processing the latest 13F filings and in this article we will study how hedge fund sentiment towards Investors Bancorp, Inc. (NASDAQ:ISBC) changed during the first quarter.

Is Investors Bancorp, Inc. (NASDAQ:ISBC) an outstanding investment right now? The best stock pickers are getting more optimistic. The number of long hedge fund positions rose by 3 lately. Our calculations also showed that ISBC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). ISBC was in 26 hedge funds’ portfolios at the end of September. There were 23 hedge funds in our database with ISBC holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Millennium Management, Catapult Capital Management

Israel Englander of Millennium Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the latest hedge fund action encompassing Investors Bancorp, Inc. (NASDAQ:ISBC).

What does smart money think about Investors Bancorp, Inc. (NASDAQ:ISBC)?

Heading into the fourth quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in ISBC over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with ISBC Positions

The largest stake in Investors Bancorp, Inc. (NASDAQ:ISBC) was held by Blue Harbour Group, which reported holding $310.3 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $90.8 million position. Other investors bullish on the company included Azora Capital, Renaissance Technologies, and Millennium Management. In terms of the portfolio weights assigned to each position Blue Harbour Group allocated the biggest weight to Investors Bancorp, Inc. (NASDAQ:ISBC), around 18.19% of its portfolio. Azora Capital is also relatively very bullish on the stock, designating 12.67 percent of its 13F equity portfolio to ISBC.

Consequently, some big names were breaking ground themselves. Holocene Advisors, managed by Brandon Haley, established the largest position in Investors Bancorp, Inc. (NASDAQ:ISBC). Holocene Advisors had $1.1 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $0.5 million investment in the stock during the quarter. The following funds were also among the new ISBC investors: Michael Gelband’s ExodusPoint Capital, Minhua Zhang’s Weld Capital Management, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s now review hedge fund activity in other stocks similar to Investors Bancorp, Inc. (NASDAQ:ISBC). We will take a look at Paramount Group Inc (NYSE:PGRE), Cantel Medical Corp. (NYSE:CMD), Virtu Financial Inc (NASDAQ:VIRT), and TreeHouse Foods Inc. (NYSE:THS). All of these stocks’ market caps are closest to ISBC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PGRE 18 293248 5
CMD 11 149052 0
VIRT 13 89772 -3
THS 18 241573 1
Average 15 193411 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $193 million. That figure was $585 million in ISBC’s case. Paramount Group Inc (NYSE:PGRE) is the most popular stock in this table. On the other hand Cantel Medical Corp. (NYSE:CMD) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Investors Bancorp, Inc. (NASDAQ:ISBC) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on ISBC, though not to the same extent, as the stock returned 7.1% during the fourth quarter (through the end of November) and outperformed the market as well.

Disclosure: None. This article was originally published at Insider Monkey.