In this article you are going to find out whether hedge funds think Southside Bancshares, Inc. (NASDAQ:SBSI) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Hedge fund interest in Southside Bancshares, Inc. (NASDAQ:SBSI) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare SBSI to other stocks including Antero Midstream Corp (NYSE:AM), Plains GP Holdings LP (NYSE:PAGP), and Magnolia Oil & Gas Corporation (NASDAQ:MGY) to get a better sense of its popularity.
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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.
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. 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 view the latest hedge fund action surrounding Southside Bancshares, Inc. (NASDAQ:SBSI).
How have hedgies been trading Southside Bancshares, Inc. (NASDAQ:SBSI)?
Heading into the second quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 7 hedge funds with a bullish position in SBSI a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Southside Bancshares, Inc. (NASDAQ:SBSI) was held by Renaissance Technologies, which reported holding $33.1 million worth of stock at the end of September. It was followed by Third Avenue Management with a $3.8 million position. Other investors bullish on the company included Millennium Management, Fisher Asset Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Pinz Capital allocated the biggest weight to Southside Bancshares, Inc. (NASDAQ:SBSI), around 0.74% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, setting aside 0.56 percent of its 13F equity portfolio to SBSI.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Weld Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Pinz Capital).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Southside Bancshares, Inc. (NASDAQ:SBSI) but similarly valued. We will take a look at Antero Midstream Corp (NYSE:AM), Plains GP Holdings LP (NYSE:PAGP), Magnolia Oil & Gas Corporation (NASDAQ:MGY), and Independent Bank Group Inc (NASDAQ:IBTX). This group of stocks’ market caps match SBSI’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 19 hedge funds with bullish positions and the average amount invested in these stocks was $64 million. That figure was $43 million in SBSI’s case. Plains GP Holdings LP (NYSE:PAGP) is the most popular stock in this table. On the other hand Antero Midstream Corp (NYSE:AM) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Southside Bancshares, Inc. (NASDAQ:SBSI) is even less popular than AM. Hedge funds dodged a bullet by taking a bearish stance towards SBSI. 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 12.2% in 2020 through June 17th but managed to beat the market by 14.8 percentage points. Unfortunately SBSI wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); SBSI investors were disappointed as the stock returned -8.4% during the second quarter (through June 17th) 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.
Disclosure: None. This article was originally published at Insider Monkey.