The government requires hedge funds and wealthy investors that crossed the $100 million equity holdings threshold are required to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31. We at Insider Monkey have made an extensive database of nearly 750 of those elite funds and prominent investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Veritex Holdings Inc (NASDAQ:VBTX) based on those filings.
Is Veritex Holdings Inc (NASDAQ:VBTX) undervalued? Investors who are in the know are taking a bearish view. The number of long hedge fund positions went down by 9 recently. Our calculations also showed that VBTX isn’t among the 30 most popular stocks among hedge funds.
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’ 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 32 percentage points since May 2014 through March 12, 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.
We’re going to view the key hedge fund action regarding Veritex Holdings Inc (NASDAQ:VBTX).
How are hedge funds trading Veritex Holdings Inc (NASDAQ:VBTX)?
Heading into the first quarter of 2019, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -53% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VBTX over the last 14 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Among these funds, Mendon Capital Advisors held the most valuable stake in Veritex Holdings Inc (NASDAQ:VBTX), which was worth $34 million at the end of the fourth quarter. On the second spot was Forest Hill Capital which amassed $9.3 million worth of shares. Moreover, Millennium Management, Citadel Investment Group, and Basswood Capital were also bullish on Veritex Holdings Inc (NASDAQ:VBTX), allocating a large percentage of their portfolios to this stock.
Since Veritex Holdings Inc (NASDAQ:VBTX) has faced bearish sentiment from the smart money, it’s safe to say that there was a specific group of fund managers that decided to sell off their full holdings in the third quarter. It’s worth mentioning that Fred Cummings’s Elizabeth Park Capital Management dropped the largest position of all the hedgies tracked by Insider Monkey, totaling about $10.3 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also sold off its stock, about $7.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 9 funds in the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Veritex Holdings Inc (NASDAQ:VBTX) but similarly valued. We will take a look at HarborOne Bancorp, Inc. (NASDAQ:HONE), Shoe Carnival, Inc. (NASDAQ:SCVL), Domo Inc. (NASDAQ:DOMO), and Boston Omaha Corporation (NASDAQ:BOMN). This group of stocks’ market caps are similar to VBTX’s market cap.
|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 10 hedge funds with bullish positions and the average amount invested in these stocks was $81 million. That figure was $52 million in VBTX’s case. Shoe Carnival, Inc. (NASDAQ:SCVL) is the most popular stock in this table. On the other hand HarborOne Bancorp, Inc. (NASDAQ:HONE) is the least popular one with only 4 bullish hedge fund positions. Veritex Holdings Inc (NASDAQ:VBTX) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on VBTX, though not to the same extent, as the stock returned 21.8% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.