Hedge Funds Are Not Banking On BancFirst Corporation (BANF)

World-class money managers like Bill Ackman and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.

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Is BancFirst Corporation (NASDAQ:BANF) an exceptional investment now? Hedge funds are taking a pessimistic view. The number of long hedge fund positions dropped by one lately. At the end of this article we will also compare BancFirst Corporation to other stocks including Exterran Partners, L.P. (NASDAQ:EXLP), Otter Tail Corporation (NASDAQ:OTTR), and Ultra Petroleum Corp. (NYSE:UPL) to get a better sense of its popularity.

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In the 21st century investor’s toolkit there are dozens of indicators stock traders use to assess their stock investments. A pair of the most underrated indicators are hedge fund and insider trading moves. Experts at Insider Monkey, a website specializing in hedge funds, have shown that, historically, those who follow the top picks of the elite hedge fund managers can outpace the S&P 500 by a significant margin (see the details here).

Keeping this in mind, let’s take a look at the recent action surrounding BancFirst Corporation (NASDAQ:BANF).

How are hedge funds trading BancFirst Corporation (NASDAQ:BANF)?

At Q3’s end, a total of five of the hedge funds tracked by Insider Monkey were long in this stock, 17% lower than from one quarter earlier. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings significantly.

According to publicly available hedge fund holdings data compiled by Insider Monkey, Mark Lee’s Forest Hill Capital has the largest position in BancFirst Corporation (NASDAQ:BANF), worth close to $19.8 million, corresponding to 1.9% of its total 13F portfolio. Occupying second spot is Millennium Management, led by Israel Englander, holding a $6.8 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other hedgies with similar optimism contain Jim Simons’ Renaissance Technologies, Lawrence Sapanski’s Scoria Capital, and Chao Ku’s Nine Chapters Capital Management.

Seeing as BancFirst Corporation (NASDAQ:BANF) has experienced a declination in interest from the aggregate hedge fund industry, logic holds that there exists a select few hedgies that elected to cut their positions entirely heading into Q4. At the top of the heap, Matthew Lindenbaum’s Basswood Capital sold off the biggest position of the 700 funds tracked by Insider Monkey, totaling an estimated $5.8 million in stock. Roger Ibbotson’s fund, Zebra Capital Management, also dumped its stock, about $0.5 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by one fund heading into Q4.

Let’s also take a look at hedge fund activity in other stocks similar to BancFirst Corporation (NASDAQ:BANF). We will take a look at Exterran Partners, L.P. (NASDAQ:EXLP), Otter Tail Corporation (NASDAQ:OTTR), Ultra Petroleum Corp. (NYSE:UPL), and ScanSource, Inc. (NASDAQ:SCSC). This group of stocks’ market valuations resemble BancFirst Corporation’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EXLP 6 27563 1
OTTR 13 22632 6
UPL 18 34318 0
SCSC 13 102304 5

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 $47 million. That eclipsed the mere $31 million in BancFirst shares that were held by the investors that we track, amounting to 3.20% of the company’s outstanding shares. Ultra Petroleum Corp. (NYSE:UPL) is the most popular stock in this table. On the other hand Exterran Partners, L.P. (NASDAQ:EXLP) is the least popular one with only six bullish hedge fund positions. Compared to these stocks BancFirst Corporation (NASDAQ:BANF) is even less popular than Exterran Partners, L.P. Considering that hedge funds aren’t fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.