Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 15 S&P 500 stocks among hedge funds at the end of September 2018 returned an average of 1% through March 15th whereas the S&P 500 Index ETF lost 2.2% during the same period. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Equity Bancshares, Inc. (NASDAQ:EQBK) from the perspective of those elite funds.
Hedge fund interest in Equity Bancshares, Inc. (NASDAQ:EQBK) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare EQBK to other stocks including BBX Capital Corporation (NYSE:BBX), SunCoke Energy, Inc (NYSE:SXC), and Briggs & Stratton Corporation (NYSE:BGG) to get a better sense of its popularity.
Why do we pay any attention at all to hedge fund sentiment? 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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a glance at the recent hedge fund action regarding Equity Bancshares, Inc. (NASDAQ:EQBK).
How are hedge funds trading Equity Bancshares, Inc. (NASDAQ:EQBK)?
At Q4’s end, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards EQBK over the last 14 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Equity Bancshares, Inc. (NASDAQ:EQBK) was held by Mendon Capital Advisors, which reported holding $26 million worth of stock at the end of December. It was followed by Renaissance Technologies with a $13.5 million position. Other investors bullish on the company included Forest Hill Capital, Castine Capital Management, and EJF Capital.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: AQR Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was EJF Capital).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Equity Bancshares, Inc. (NASDAQ:EQBK) but similarly valued. We will take a look at BBX Capital Corporation (NYSE:BBX), SunCoke Energy, Inc (NYSE:SXC), Briggs & Stratton Corporation (NYSE:BGG), and Aptinyx Inc. (NASDAQ:APTX). This group of stocks’ market valuations resemble EQBK’s market valuation.
|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 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $56 million in EQBK’s case. SunCoke Energy, Inc (NYSE:SXC) is the most popular stock in this table. On the other hand Aptinyx Inc. (NASDAQ:APTX) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Equity Bancshares, Inc. (NASDAQ:EQBK) is even less popular than APTX. Hedge funds dodged a bullet by taking a bearish stance towards EQBK. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately EQBK wasn’t nearly as popular as these 15 stock (hedge fund sentiment was very bearish); EQBK investors were disappointed as the stock returned -16.4% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.