Hedge Funds Are Selling Home Bancshares, Inc. (Conway, AR) (HOMB)

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 third 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 4 years and analyze what the smart money thinks of Home Bancshares, Inc. (Conway, AR) (NASDAQ:HOMB) based on that data.

Home Bancshares, Inc. (Conway, AR) (NASDAQ:HOMB) was in 11 hedge funds’ portfolios at the end of September. HOMB investors should pay attention to a decrease in support from the world’s most elite money managers in recent months. There were 13 hedge funds in our database with HOMB positions at the end of the previous quarter. Our calculations also showed that HOMB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Matthew Lindenbaum Basswood Capital

Matthew Lindenbaum of Basswood Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s view the latest hedge fund action encompassing Home Bancshares, Inc. (Conway, AR) (NASDAQ:HOMB).

What have hedge funds been doing with Home Bancshares, Inc. (Conway, AR) (NASDAQ:HOMB)?

Heading into the fourth quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HOMB over the last 17 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Among these funds, Basswood Capital held the most valuable stake in Home Bancshares, Inc. (Conway, AR) (NASDAQ:HOMB), which was worth $4.4 million at the end of the third quarter. On the second spot was Balyasny Asset Management which amassed $4.2 million worth of shares. Millennium Management, Skylands Capital, and Holocene Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position AlphaOne Capital Partners allocated the biggest weight to Home Bancshares, Inc. (Conway, AR) (NASDAQ:HOMB), around 0.55% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, dishing out 0.32 percent of its 13F equity portfolio to HOMB.

Judging by the fact that Home Bancshares, Inc. (Conway, AR) (NASDAQ:HOMB) has faced bearish sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of hedge funds that decided to sell off their positions entirely heading into Q4. Intriguingly, David E. Shaw’s D E Shaw said goodbye to the biggest stake of the “upper crust” of funds tracked by Insider Monkey, worth about $1 million in stock. Ken Griffin’s fund, Citadel Investment Group, also dumped its stock, about $0.9 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 2 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Home Bancshares, Inc. (Conway, AR) (NASDAQ:HOMB). These stocks are John Bean Technologies Corporation (NYSE:JBT), Darling Ingredients Inc. (NYSE:DAR), Investors Bancorp, Inc. (NASDAQ:ISBC), and Paramount Group Inc (NYSE:PGRE). This group of stocks’ market values are closest to HOMB’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JBT 14 102280 4
DAR 24 226792 8
ISBC 26 585162 3
PGRE 18 293248 5
Average 20.5 301871 5

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $302 million. That figure was $13 million in HOMB’s case. Investors Bancorp, Inc. (NASDAQ:ISBC) is the most popular stock in this table. On the other hand John Bean Technologies Corporation (NYSE:JBT) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Home Bancshares, Inc. (Conway, AR) (NASDAQ:HOMB) is even less popular than JBT. Hedge funds dodged a bullet by taking a bearish stance towards HOMB. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately HOMB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); HOMB investors were disappointed as the stock returned 0.8% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.

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