At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
In this article, we are going to assess the hedge fund sentiment towards Independent Bank Group Inc (NASDAQ:IBTX). Overall, it looks like investors who are in the know are becoming less confident. The number of bullish hedge fund bets declined by three last quarter. In this way, there were 12 funds in our database with IBTX positions at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Apptio Inc (NASDAQ:APTI), Meridian Bioscience, Inc. (NASDAQ:VIVO), and Blueprint Medicines Corp (NASDAQ:BPMC) to gather more data points.
Follow Independent Bank Group Inc. (NASDAQ:IBTX)
Follow Independent Bank Group Inc. (NASDAQ:IBTX)
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
Now, let’s take a glance at the new action encompassing Independent Bank Group Inc (NASDAQ:IBTX).
How have hedgies been trading Independent Bank Group Inc (NASDAQ:IBTX)?
At the end of the third quarter, nine funds tracked by Insider Monkey were bullish on this stock, down by 25% from the second quarter of 2016. By comparison, nine funds held shares or bullish call options in IBTX heading into this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Matthew A. Weatherbie’s Weatherbie Capital has the most valuable position in Independent Bank Group Inc (NASDAQ:IBTX), worth close to $11.6 million, amounting to 1.5% of its total 13F portfolio. On Weatherbie Capital’s heels is Millennium Management, one of the 10 largest hedge funds in the world, with a $6.7 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions consist of Paul Magidson, Jonathan Cohen, and Ostrom Enders’s Castine Capital Management, Jim Simons’ Renaissance Technologies and William Black’s Consector Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Seeing as Independent Bank Group Inc (NASDAQ:IBTX) has faced declining sentiment from hedge fund managers, it’s easy to see that there exists a select few money managers that elected to cut their positions entirely between July and September. It’s worth mentioning that Douglas Dunn and Vincent Soler’s Limestone Value Partners got rid of the largest stake of the “upper crust” of funds studied by Insider Monkey, totaling about $0.4 million in stock, and Cliff Asness’ AQR Capital Management was right behind this move, as the fund dumped about $0.3 million worth of shares.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Independent Bank Group Inc (NASDAQ:IBTX) but similarly valued. We will take a look at Apptio Inc (NASDAQ:APTI), Meridian Bioscience, Inc. (NASDAQ:VIVO), Blueprint Medicines Corp (NASDAQ:BPMC), and Getty Realty Corp. (NYSE:GTY). This group of stocks’ market valuations are closest to IBTX’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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 $76 million. That figure was $28 million in IBTX’s case. Meridian Bioscience, Inc. (NASDAQ:VIVO) is the most popular stock in this table. On the other hand Getty Realty Corp. (NYSE:GTY) is the least popular one with only nine bullish hedge fund positions. Compared to these stocks Independent Bank Group Inc (NASDAQ:IBTX) registered the same number of investors holding shares as Getty Realty Corp. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.