In this article we will take a look at whether hedge funds think Investors Bancorp, Inc. (NASDAQ:ISBC) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Investors Bancorp, Inc. (NASDAQ:ISBC) has seen a decrease in support from the world’s most elite money managers in recent months. Our calculations also showed that ISBC isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 58 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s analyze the recent hedge fund action surrounding Investors Bancorp, Inc. (NASDAQ:ISBC).
How have hedgies been trading Investors Bancorp, Inc. (NASDAQ:ISBC)?
Heading into the second quarter of 2020, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ISBC over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Citadel Investment Group held the most valuable stake in Investors Bancorp, Inc. (NASDAQ:ISBC), which was worth $53.9 million at the end of the third quarter. On the second spot was Carlson Capital which amassed $16.3 million worth of shares. MFP Investors, Renaissance Technologies, and Gillson Capital 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 MFP Investors allocated the biggest weight to Investors Bancorp, Inc. (NASDAQ:ISBC), around 2.11% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, earmarking 1.59 percent of its 13F equity portfolio to ISBC.
Since Investors Bancorp, Inc. (NASDAQ:ISBC) has experienced a decline in interest from hedge fund managers, it’s easy to see that there were a few hedgies that elected to cut their positions entirely by the end of the first quarter. At the top of the heap, Michael Gelband’s ExodusPoint Capital cut the biggest position of all the hedgies monitored by Insider Monkey, totaling close to $2.1 million in stock, and Michael Kharitonov and Jon David McAuliffe’s Voleon Capital was right behind this move, as the fund dropped about $1.1 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 4 funds by the end of the first quarter.
Let’s check out hedge fund activity in other stocks similar to Investors Bancorp, Inc. (NASDAQ:ISBC). We will take a look at Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN), Cronos Group Inc. (NASDAQ:CRON), Ryman Hospitality Properties, Inc. (NYSE:RHP), and ESCO Technologies Inc. (NYSE:ESE). This group of stocks’ market caps resemble ISBC’s market cap.
|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 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $198 million. That figure was $136 million in ISBC’s case. Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) is the most popular stock in this table. On the other hand ESCO Technologies Inc. (NYSE:ESE) is the least popular one with only 8 bullish hedge fund positions. Investors Bancorp, Inc. (NASDAQ:ISBC) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately ISBC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ISBC were disappointed as the stock returned 10.2% during the same time period 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.
Disclosure: None. This article was originally published at Insider Monkey.