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Is First Financial Bankshares Inc (FFIN) Going to Burn These Hedge Funds?

In this article we will take a look at whether hedge funds think First Financial Bankshares Inc (NASDAQ:FFIN) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is First Financial Bankshares Inc (NASDAQ:FFIN) ready to rally soon? Prominent investors are in a bullish mood. The number of long hedge fund positions rose by 1 lately. Our calculations also showed that FFIN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 easiest remote jobs that pay well to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a glance at the latest hedge fund action encompassing First Financial Bankshares Inc (NASDAQ:FFIN).

How are hedge funds trading First Financial Bankshares Inc (NASDAQ:FFIN)?

Heading into the second quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the previous quarter. By comparison, 13 hedge funds held shares or bullish call options in FFIN a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

The largest stake in First Financial Bankshares Inc (NASDAQ:FFIN) was held by Millennium Management, which reported holding $7.4 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $6.9 million position. Other investors bullish on the company included GLG Partners, D E Shaw, and PDT Partners. In terms of the portfolio weights assigned to each position PDT Partners allocated the biggest weight to First Financial Bankshares Inc (NASDAQ:FFIN), around 0.14% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, designating 0.05 percent of its 13F equity portfolio to FFIN.

Now, key hedge funds were breaking ground themselves. GLG Partners, managed by Noam Gottesman, created the most outsized position in First Financial Bankshares Inc (NASDAQ:FFIN). GLG Partners had $3.9 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $0.6 million investment in the stock during the quarter. The only other fund with a brand new FFIN position is John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s now review hedge fund activity in other stocks similar to First Financial Bankshares Inc (NASDAQ:FFIN). These stocks are Southwest Gas Holdings, Inc. (NYSE:SWX), American Campus Communities, Inc. (NYSE:ACC), Sealed Air Corporation (NYSE:SEE), and KT Corporation (NYSE:KT). This group of stocks’ market caps are similar to FFIN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SWX 13 79506 -10
ACC 16 195709 -5
SEE 29 702381 -1
KT 15 159253 -2
Average 18.25 284212 -4.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $284 million. That figure was $28 million in FFIN’s case. Sealed Air Corporation (NYSE:SEE) is the most popular stock in this table. On the other hand Southwest Gas Holdings, Inc. (NYSE:SWX) is the least popular one with only 13 bullish hedge fund positions. First Financial Bankshares Inc (NASDAQ:FFIN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately FFIN wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); FFIN investors were disappointed as the stock returned 7.4% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.

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