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). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. 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 First Financial Bankshares Inc (NASDAQ:FFIN) at the end of the second quarter and determine whether the smart money was really smart about this stock.
First Financial Bankshares Inc (NASDAQ:FFIN) has experienced an increase in enthusiasm from smart money in recent months. First Financial Bankshares Inc (NASDAQ:FFIN) was in 18 hedge funds’ portfolios at the end of June. The all time high for this statistics is 16. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 14 hedge funds in our database with FFIN positions at the end of the first quarter. Our calculations also showed that FFIN 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.
To most market participants, hedge funds are assumed to be underperforming, outdated investment tools of years past. While there are more than 8000 funds trading today, We hone in on the upper echelon of this group, about 850 funds. Most estimates calculate that this group of people oversee the lion’s share of the hedge fund industry’s total capital, and by keeping track of their first-class picks, Insider Monkey has revealed a few investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
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 real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. 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. Keeping this in mind let’s analyze the new hedge fund action regarding First Financial Bankshares Inc (NASDAQ:FFIN).
What have hedge funds been doing with First Financial Bankshares Inc (NASDAQ:FFIN)?
At Q2’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 29% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards FFIN over the last 20 quarters. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, GLG Partners, managed by Noam Gottesman, holds the largest position in First Financial Bankshares Inc (NASDAQ:FFIN). GLG Partners has a $5.4 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On GLG Partners’s heels is Israel Englander of Millennium Management, with a $3.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers that hold long positions consist of Peter Muller’s PDT Partners, Ken Griffin’s Citadel Investment Group and Michael Gelband’s ExodusPoint Capital. In terms of the portfolio weights assigned to each position Neo Ivy Capital allocated the biggest weight to First Financial Bankshares Inc (NASDAQ:FFIN), around 0.23% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, designating 0.14 percent of its 13F equity portfolio to FFIN.
As industrywide interest jumped, specific money managers were breaking ground themselves. ExodusPoint Capital, managed by Michael Gelband, initiated the most valuable position in First Financial Bankshares Inc (NASDAQ:FFIN). ExodusPoint Capital had $1.8 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also initiated a $1.1 million position during the quarter. The following funds were also among the new FFIN investors: Jonathan Soros’s JS Capital, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Greg Eisner’s Engineers Gate Manager.
Let’s now take a look at hedge fund activity in other stocks similar to First Financial Bankshares Inc (NASDAQ:FFIN). These stocks are TriNet Group Inc (NYSE:TNET), SelectQuote, Inc. (NYSE:SLQT), HUYA Inc. (NYSE:HUYA), Toll Brothers Inc (NYSE:TOL), Essent Group Ltd (NYSE:ESNT), ONE Gas Inc (NYSE:OGS), and Nevro Corp (NYSE:NVRO). This group of stocks’ market valuations are similar to FFIN’s market valuation.
|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 27.7 hedge funds with bullish positions and the average amount invested in these stocks was $350 million. That figure was $21 million in FFIN’s case. Toll Brothers Inc (NYSE:TOL) is the most popular stock in this table. On the other hand ONE Gas Inc (NYSE:OGS) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks First Financial Bankshares Inc (NASDAQ:FFIN) is even less popular than OGS. Our overall hedge fund sentiment score for FFIN is 39. 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. Hedge funds dodged a bullet by taking a bearish stance towards FFIN. 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 24.8% in 2020 through the end of September but managed to beat the market by 19.3 percentage points. Unfortunately FFIN wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); FFIN investors were disappointed as the stock returned -3% in 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.