Hedge Funds Are Betting On First Midwest Bancorp Inc (FMBI)

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of 4 percentage points during the first 9 months of 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in First Midwest Bancorp Inc (NASDAQ:FMBI).

First Midwest Bancorp Inc (NASDAQ:FMBI) shareholders have witnessed an increase in activity from the world’s largest hedge funds of late. Our calculations also showed that FMBI isn’t among the 30 most popular stocks among hedge funds (see the video below).
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the latest hedge fund action surrounding First Midwest Bancorp Inc (NASDAQ:FMBI).

How are hedge funds trading First Midwest Bancorp Inc (NASDAQ:FMBI)?

At Q2’s end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the first quarter of 2019. By comparison, 11 hedge funds held shares or bullish call options in FMBI a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Michael Price MFP Investors

Michael Price of MFP Investors

The largest stake in First Midwest Bancorp Inc (NASDAQ:FMBI) was held by Pzena Investment Management, which reported holding $31 million worth of stock at the end of March. It was followed by Tricadia Capital Management with a $24.2 million position. Other investors bullish on the company included Millennium Management, MFP Investors, and D E Shaw.

Now, key hedge funds have jumped into First Midwest Bancorp Inc (NASDAQ:FMBI) headfirst. Tricadia Capital Management, managed by Michael Barnes and Arif Inayatullah, assembled the largest position in First Midwest Bancorp Inc (NASDAQ:FMBI). Tricadia Capital Management had $24.2 million invested in the company at the end of the quarter. Michael Price’s MFP Investors also initiated a $5.9 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP and Michael Gelband’s ExodusPoint Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as First Midwest Bancorp Inc (NASDAQ:FMBI) but similarly valued. These stocks are Carpenter Technology Corporation (NYSE:CRS), Yext, Inc. (NYSE:YEXT), The Hain Celestial Group, Inc. (NASDAQ:HAIN), and Endava plc (NYSE:DAVA). All of these stocks’ market caps are closest to FMBI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CRS 12 61839 -1
YEXT 21 186091 -2
HAIN 17 545406 4
DAVA 8 52160 2
Average 14.5 211374 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $211 million. That figure was $97 million in FMBI’s case. Yext, Inc. (NYSE:YEXT) is the most popular stock in this table. On the other hand Endava plc (NYSE:DAVA) is the least popular one with only 8 bullish hedge fund positions. First Midwest Bancorp Inc (NASDAQ:FMBI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately FMBI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FMBI investors were disappointed as the stock returned -4.2% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.

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