While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding HBT Financial, Inc. (NASDAQ:HBT).
Is HBT a good stock to buy now? Prominent investors were becoming hopeful. The number of bullish hedge fund bets increased by 3 in recent months. HBT Financial, Inc. (NASDAQ:HBT) was in 9 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 10. Our calculations also showed that HBT isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 66 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s go over the recent hedge fund action encompassing HBT Financial, Inc. (NASDAQ:HBT).
Do Hedge Funds Think HBT Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in HBT a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, Adage Capital Management was the largest shareholder of HBT Financial, Inc. (NASDAQ:HBT), with a stake worth $5 million reported as of the end of September. Trailing Adage Capital Management was Royce & Associates, which amassed a stake valued at $3.4 million. Citadel Investment Group, Two Sigma Advisors, and Renaissance Technologies 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 Royce & Associates allocated the biggest weight to HBT Financial, Inc. (NASDAQ:HBT), around 0.04% of its 13F portfolio. Adage Capital Management is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to HBT.
Now, key hedge funds were breaking ground themselves. GLG Partners, managed by Noam Gottesman, initiated the biggest position in HBT Financial, Inc. (NASDAQ:HBT). GLG Partners had $0.2 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $0.2 million position during the quarter. The only other fund with a brand new HBT position is D. E. Shaw’s D E Shaw.
Let’s now take a look at hedge fund activity in other stocks similar to HBT Financial, Inc. (NASDAQ:HBT). These stocks are Galiano Gold Inc. (NYSE:GAU), Willdan Group, Inc. (NASDAQ:WLDN), Farmers National Banc Corp (NASDAQ:FMNB), Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX), CytomX Therapeutics, Inc. (NASDAQ:CTMX), Hooker Furniture Corporation (NASDAQ:HOFT), and Americas Gold and Silver Corporation (NYSE:USAS). This group of stocks’ market values are closest to HBT’s market value.
|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 9.9 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $10 million in HBT’s case. CytomX Therapeutics, Inc. (NASDAQ:CTMX) is the most popular stock in this table. On the other hand Willdan Group, Inc. (NASDAQ:WLDN) is the least popular one with only 3 bullish hedge fund positions. HBT Financial, Inc. (NASDAQ:HBT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HBT is 52.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on HBT as the stock returned 36.4% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.