Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.6% in 2019 (through the end of November) and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Peoples Utah Bancorp (NASDAQ:PUB) investors should pay attention to an increase in hedge fund interest in recent months. Our calculations also showed that PUB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now let’s view the fresh hedge fund action regarding Peoples Utah Bancorp (NASDAQ:PUB).
How are hedge funds trading Peoples Utah Bancorp (NASDAQ:PUB)?
Heading into the fourth quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 100% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PUB over the last 17 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
The largest stake in Peoples Utah Bancorp (NASDAQ:PUB) was held by Forest Hill Capital, which reported holding $9.6 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $5.4 million position. Other investors bullish on the company included Winton Capital Management, Two Sigma Advisors, and Zebra Capital Management. In terms of the portfolio weights assigned to each position Forest Hill Capital allocated the biggest weight to Peoples Utah Bancorp (NASDAQ:PUB), around 3.39% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, earmarking 0.31 percent of its 13F equity portfolio to PUB.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Winton Capital Management, managed by David Harding, established the largest position in Peoples Utah Bancorp (NASDAQ:PUB). Winton Capital Management had $0.9 million invested in the company at the end of the quarter. Roger Ibbotson’s Zebra Capital Management also initiated a $0.3 million position during the quarter. The only other fund with a new position in the stock is Israel Englander’s Millennium Management.
Let’s check out hedge fund activity in other stocks similar to Peoples Utah Bancorp (NASDAQ:PUB). These stocks are New Media Investment Group Inc (NYSE:NEWM), TG Therapeutics Inc (NASDAQ:TGTX), Kodiak Sciences Inc (NASDAQ:KOD), and GTT Communications Inc (NYSE:GTT). All of these stocks’ market caps are similar to PUB’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 14 hedge funds with bullish positions and the average amount invested in these stocks was $167 million. That figure was $17 million in PUB’s case. New Media Investment Group Inc (NYSE:NEWM) is the most popular stock in this table. On the other hand Kodiak Sciences Inc (NASDAQ:KOD) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Peoples Utah Bancorp (NASDAQ:PUB) is even less popular than KOD. Hedge funds dodged a bullet by taking a bearish stance towards PUB. 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 PUB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); PUB investors were disappointed as the stock returned 4.2% 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.