Hedge Funds Are Dumping Cadence Bancorporation (CADE)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Cadence Bancorporation (NYSE:CADE) based on that data and determine whether they were really smart about the stock.

Cadence Bancorporation (NYSE:CADE) was in 21 hedge funds’ portfolios at the end of June. The all time high for this statistics is 29. CADE has experienced a decrease in enthusiasm from smart money in recent months. There were 29 hedge funds in our database with CADE positions at the end of the first quarter. Our calculations also showed that CADE isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Fred Cummings of Elizabeth Park Capital

Fred Cummings of Elizabeth Park Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We are also checking out this lithium company which could benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we’re going to check out the new hedge fund action surrounding Cadence Bancorporation (NYSE:CADE).

How have hedgies been trading Cadence Bancorporation (NYSE:CADE)?

Heading into the third quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -28% from one quarter earlier. By comparison, 18 hedge funds held shares or bullish call options in CADE 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.

The largest stake in Cadence Bancorporation (NYSE:CADE) was held by Azora Capital, which reported holding $21.5 million worth of stock at the end of September. It was followed by Diamond Hill Capital with a $18.5 million position. Other investors bullish on the company included Arrowstreet Capital, Fourthstone LLC, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Fourthstone LLC allocated the biggest weight to Cadence Bancorporation (NYSE:CADE), around 9.05% of its 13F portfolio. Azora Capital is also relatively very bullish on the stock, dishing out 3.51 percent of its 13F equity portfolio to CADE.

Because Cadence Bancorporation (NYSE:CADE) has faced falling interest from the aggregate hedge fund industry, logic holds that there were a few money managers who sold off their full holdings last quarter. Intriguingly, Daniel Johnson’s Gillson Capital cut the biggest investment of all the hedgies followed by Insider Monkey, comprising close to $4 million in stock. Noam Gottesman’s fund, GLG Partners, also sold off its stock, about $2.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 8 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Cadence Bancorporation (NYSE:CADE) but similarly valued. These stocks are Pliant Therapeutics, Inc. (NASDAQ:PLRX), The RealReal, Inc. (NASDAQ:REAL), Calavo Growers, Inc. (NASDAQ:CVGW), SFL Corporation Ltd. (NYSE:SFL), Health Catalyst, Inc (NASDAQ:HCAT), NanoString Technologies Inc (NASDAQ:NSTG), and Infinera Corp. (NASDAQ:INFN). All of these stocks’ market caps are similar to CADE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PLRX 13 241772 13
REAL 19 201408 4
CVGW 14 78053 3
SFL 15 41362 1
HCAT 13 116981 -1
NSTG 17 123754 -1
INFN 21 271990 7
Average 16 153617 3.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $154 million. That figure was $110 million in CADE’s case. Infinera Corp. (NASDAQ:INFN) is the most popular stock in this table. On the other hand Pliant Therapeutics, Inc. (NASDAQ:PLRX) is the least popular one with only 13 bullish hedge fund positions. Cadence Bancorporation (NYSE:CADE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CADE is 68.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately CADE wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CADE were disappointed as the stock returned -2.5% in Q3 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 many of these stocks already outperformed the market so far this year.

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