Hedge Funds Cashing Out Of Prosperity Bancshares, Inc. (PB)

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 first 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 4.5 years and analyze what the smart money thinks of Prosperity Bancshares, Inc. (NYSE:PB) based on that data.

Prosperity Bancshares, Inc. (NYSE:PB) has seen a decrease in support from the world’s most elite money managers recently. Our calculations also showed that PB 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. 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, we take a look at lists like the 10 free email services without phone verification to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to analyze the key hedge fund action encompassing Prosperity Bancshares, Inc. (NYSE:PB).

What have hedge funds been doing with Prosperity Bancshares, Inc. (NYSE:PB)?

At Q1’s end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in PB a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

The largest stake in Prosperity Bancshares, Inc. (NYSE:PB) was held by Fisher Asset Management, which reported holding $15.7 million worth of stock at the end of September. It was followed by Millennium Management with a $15.5 million position. Other investors bullish on the company included Citadel Investment Group, Balyasny Asset Management, and Elizabeth Park Capital Management. In terms of the portfolio weights assigned to each position Elizabeth Park Capital Management allocated the biggest weight to Prosperity Bancshares, Inc. (NYSE:PB), around 4.07% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, setting aside 0.44 percent of its 13F equity portfolio to PB.

Seeing as Prosperity Bancshares, Inc. (NYSE:PB) has experienced falling interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of fund managers that slashed their full holdings heading into Q4. Intriguingly, Donald Sussman’s Paloma Partners dropped the largest investment of all the hedgies monitored by Insider Monkey, comprising close to $20.4 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund dropped about $9.9 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 6 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Prosperity Bancshares, Inc. (NYSE:PB). These stocks are Owl Rock Capital Corporation (NYSE:ORCC), Elastic N.V. (NYSE:ESTC), WEX Inc (NYSE:WEX), and Momo Inc (NASDAQ:MOMO). This group of stocks’ market values are similar to PB’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ORCC 11 118961 3
ESTC 33 835088 -6
WEX 35 354821 10
MOMO 25 585481 -13
Average 26 473588 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $474 million. That figure was $81 million in PB’s case. WEX Inc (NYSE:WEX) is the most popular stock in this table. On the other hand Owl Rock Capital Corporation (NYSE:ORCC) is the least popular one with only 11 bullish hedge fund positions. Prosperity Bancshares, Inc. (NYSE:PB) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately PB wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PB investors were disappointed as the stock returned 19.5% during the second 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 in 2020.

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