Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Index returned approximately 12.1% in the first 5 months of this year through May 30th (including dividend payments). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 18.7% during the same 5-month period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ stock picks rather than directly investing in hedge funds. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like IBERIABANK Corporation (NASDAQ:IBKC).
Is IBERIABANK Corporation (NASDAQ:IBKC) a buy, sell, or hold? Prominent investors are taking a bullish view. The number of bullish hedge fund positions improved by 2 recently. Our calculations also showed that ibkc isn’t among the 30 most popular stocks among hedge funds. IBKC was in 26 hedge funds’ portfolios at the end of March. There were 24 hedge funds in our database with IBKC positions at the end of the previous quarter.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Noam Gottesman, GLG Partners
Let’s view the recent hedge fund action encompassing IBERIABANK Corporation (NASDAQ:IBKC).
How have hedgies been trading IBERIABANK Corporation (NASDAQ:IBKC)?
At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the fourth quarter of 2018. By comparison, 21 hedge funds held shares or bullish call options in IBKC a year ago. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Griffin’s Citadel Investment Group has the most valuable position in IBERIABANK Corporation (NASDAQ:IBKC), worth close to $82.7 million, accounting for less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Gillson Capital, led by Daniel Johnson, holding a $16.2 million position; 2.1% of its 13F portfolio is allocated to the stock. Some other peers that are bullish include Noam Gottesman’s GLG Partners, Israel Englander’s Millennium Management and Mark Lee’s Forest Hill Capital.
As industrywide interest jumped, specific money managers were leading the bulls’ herd. Laurion Capital Management, managed by Benjamin A. Smith, assembled the most valuable position in IBERIABANK Corporation (NASDAQ:IBKC). Laurion Capital Management had $1.7 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also made a $1.1 million investment in the stock during the quarter. The other funds with brand new IBKC positions are Mike Vranos’s Ellington, Michael Gelband’s ExodusPoint Capital, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..
Let’s check out hedge fund activity in other stocks similar to IBERIABANK Corporation (NASDAQ:IBKC). We will take a look at Agios Pharmaceuticals Inc (NASDAQ:AGIO), Teladoc Health, Inc. (NYSE:TDOC), CoreSite Realty Corp (NYSE:COR), and First Financial Bankshares Inc (NASDAQ:FFIN). This group of stocks’ market caps resemble IBKC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AGIO | 22 | 316343 | 5 |
| TDOC | 17 | 166690 | -2 |
| COR | 13 | 226074 | -2 |
| FFIN | 13 | 32742 | 7 |
| Average | 16.25 | 185462 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $185 million. That figure was $195 million in IBKC’s case. Agios Pharmaceuticals Inc (NASDAQ:AGIO) is the most popular stock in this table. On the other hand CoreSite Realty Corp (NYSE:COR) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks IBERIABANK Corporation (NASDAQ:IBKC) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on IBKC as the stock returned 2.6% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
