Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of First Midwest Bancorp Inc (NASDAQ:FMBI) based on that data and determine whether they were really smart about the stock.
Hedge fund interest in First Midwest Bancorp Inc (NASDAQ:FMBI) 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 FMBI to other stocks including Workiva Inc (NYSE:WK), Central Garden & Pet Co (NASDAQ:CENT), and Heartland Express, Inc. (NASDAQ:HTLD) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 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 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. 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 we’re going to check out the latest hedge fund action surrounding First Midwest Bancorp Inc (NASDAQ:FMBI).
What have hedge funds been doing with First Midwest Bancorp Inc (NASDAQ:FMBI)?
Heading into the second quarter of 2020, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FMBI over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Pzena Investment Management held the most valuable stake in First Midwest Bancorp Inc (NASDAQ:FMBI), which was worth $25 million at the end of the third quarter. On the second spot was Millennium Management which amassed $3.5 million worth of shares. GLG Partners, MFP Investors, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position MFP Investors allocated the biggest weight to First Midwest Bancorp Inc (NASDAQ:FMBI), around 0.38% of its 13F portfolio. Pzena Investment Management is also relatively very bullish on the stock, setting aside 0.19 percent of its 13F equity portfolio to FMBI.
Judging by the fact that First Midwest Bancorp Inc (NASDAQ:FMBI) has faced a decline in interest from the smart money, it’s safe to say that there exists a select few hedgies that elected to cut their entire stakes by the end of the first quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management said goodbye to the largest position of the “upper crust” of funds watched by Insider Monkey, comprising about $4.4 million in stock. Michael Kharitonov and Jon David McAuliffe’s fund, Voleon Capital, also dumped its stock, about $1.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to First Midwest Bancorp Inc (NASDAQ:FMBI). These stocks are Workiva Inc (NYSE:WK), Central Garden & Pet Co (NASDAQ:CENT), Heartland Express, Inc. (NASDAQ:HTLD), and Hailiang Education Group Inc. (NASDAQ:HLG). This group of stocks’ market caps match FMBI’s market cap.
|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 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $38 million in FMBI’s case. Central Garden & Pet Co (NASDAQ:CENT) is the most popular stock in this table. On the other hand Hailiang Education Group Inc. (NASDAQ:HLG) is the least popular one with only 2 bullish hedge fund positions. First Midwest Bancorp Inc (NASDAQ:FMBI) 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 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately FMBI wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); FMBI investors were disappointed as the stock returned 2% 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.
Disclosure: None. This article was originally published at Insider Monkey.