World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Is BankUnited (NYSE:BKU) the right investment to pursue these days? Money managers are taking a pessimistic view. The number of bullish hedge fund bets shrunk by 2 in recent months. Our calculations also showed that bku isn’t among the 30 most popular stocks among hedge funds. BKU was in 19 hedge funds’ portfolios at the end of the first quarter of 2019. There were 21 hedge funds in our database with BKU positions at the end of the previous quarter.
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 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 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 our short portfolio.
Let’s take a look at the recent hedge fund action surrounding BankUnited (NYSE:BKU).
What have hedge funds been doing with BankUnited (NYSE:BKU)?
Heading into the second quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards BKU over the last 15 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Ric Dillon’s Diamond Hill Capital has the largest position in BankUnited (NYSE:BKU), worth close to $206 million, accounting for 1.1% of its total 13F portfolio. Sitting at the No. 2 spot is Israel Englander of Millennium Management, with a $128.4 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish include Ken Griffin’s Citadel Investment Group, Dmitry Balyasny’s Balyasny Asset Management and Jim Simons’s Renaissance Technologies.
Seeing as BankUnited (NYSE:BKU) has witnessed a decline in interest from the smart money, we can see that there was a specific group of money managers that slashed their positions entirely in the third quarter. It’s worth mentioning that Jeffrey Hinkle’s Shoals Capital Management cut the biggest investment of the “upper crust” of funds monitored by Insider Monkey, valued at close to $12.7 million in stock. John A. Levin’s fund, Levin Capital Strategies, also cut its stock, about $3.8 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 2 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as BankUnited (NYSE:BKU) but similarly valued. These stocks are Sunstone Hotel Investors Inc (NYSE:SHO), Tetra Tech, Inc. (NASDAQ:TTEK), MFA Financial, Inc. (NYSE:MFA), and Silgan Holdings Inc. (NASDAQ:SLGN). This group of stocks’ market caps are similar to BKU’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SHO | 20 | 156169 | 4 |
| TTEK | 23 | 58316 | -2 |
| MFA | 16 | 130476 | -2 |
| SLGN | 15 | 156867 | 1 |
| Average | 18.5 | 125457 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $125 million. That figure was $536 million in BKU’s case. Tetra Tech, Inc. (NASDAQ:TTEK) is the most popular stock in this table. On the other hand Silgan Holdings Inc. (NASDAQ:SLGN) is the least popular one with only 15 bullish hedge fund positions. BankUnited (NYSE:BKU) is not the most popular stock in this group but hedge fund interest is still above average. 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 BKU, though not to the same extent, as the stock returned -0.1% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
