There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze First Financial Bankshares Inc (NASDAQ:FFIN).
Is First Financial Bankshares Inc (NASDAQ:FFIN) a safe stock to buy now? The investors from our database seem to be not very confident in the stock and amid an 8% drop in the third quarter, the number of funds with long positions declined by three to five. However, 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 Louisiana-Pacific Corporation (NYSE:LPX), Monolithic Power Systems, Inc. (NASDAQ:MPWR), and Rowan Companies PLC (NYSE:RDC) to gather more data points.
In the 21st century investor’s toolkit there are a multitude of methods that stock traders put to use to size up publicly traded companies. Two of the less known methods are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the best money managers can beat the S&P 500 by a very impressive amount (see the details here).
Now, we’re going to take a look at the new action encompassing First Financial Bankshares Inc (NASDAQ:FFIN).
What have hedge funds been doing with First Financial Bankshares Inc (NASDAQ:FFIN)?
As stated earlier, at the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 38% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Sharif Siddiqui’s Alpenglow Capital has the largest position in First Financial Bankshares Inc (NASDAQ:FFIN), worth close to $3.7 million, corresponding to 3.1% of its total 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which holds a $3.1 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Remaining professional money managers with similar optimism comprise D. E. Shaw’s D E Shaw, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Peter Muller’s PDT Partners.
Seeing as First Financial Bankshares Inc (NASDAQ:FFIN) has faced a declining sentiment from hedge fund managers, it’s easy to see that there was a specific group of funds who were dropping their full holdings in the third quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dumped the largest investment of the 700 funds tracked by Insider Monkey, totaling an estimated $0.8 million in stock, and Jim Simons’ Renaissance Technologies was right behind this move, as the fund dropped about $0.7 million worth of shares.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as First Financial Bankshares Inc (NASDAQ:FFIN) but similarly valued. We will take a look at Louisiana-Pacific Corporation (NYSE:LPX), Monolithic Power Systems, Inc. (NASDAQ:MPWR), Rowan Companies PLC (NYSE:RDC), and WESCO International, Inc. (NYSE:WCC). All of these stocks’ market caps match FFIN’s market cap.
|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 19 hedge funds with bullish positions and the average amount invested in these stocks was $345 million. That figure was just $9 million in FFIN’s case. Rowan Companies PLC (NYSE:RDC) is the most popular stock in this table. On the other hand Monolithic Power Systems, Inc. (NASDAQ:MPWR) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks First Financial Bankshares Inc (NASDAQ:FFIN) is even less popular than MPWR. 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.