Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Independent Bank Corporation (NASDAQ:IBCP) in this article.
Is IBCP a good stock to buy now? The smart money was getting less bullish. The number of long hedge fund bets were cut by 1 recently. Independent Bank Corporation (NASDAQ:IBCP) was in 13 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 14. Our calculations also showed that IBCP 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 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 we’re going to go over the key hedge fund action surrounding Independent Bank Corporation (NASDAQ:IBCP).
Do Hedge Funds Think IBCP Is A Good Stock To Buy Now?
At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the previous quarter. By comparison, 14 hedge funds held shares or bullish call options in IBCP a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the number one position in Independent Bank Corporation (NASDAQ:IBCP), worth close to $12.7 million, corresponding to less than 0.1%% of its total 13F portfolio. The second largest stake is held by Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $2.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish encompass D. E. Shaw’s D E Shaw, Cliff Asness’s AQR Capital Management and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Algert Coldiron Investors allocated the biggest weight to Independent Bank Corporation (NASDAQ:IBCP), around 0.05% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to IBCP.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Royce & Associates. 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 none of the 750+ hedge funds tracked by Insider Monkey identified IBCP as a viable investment and initiated a position in the stock.
Let’s check out hedge fund activity in other stocks similar to Independent Bank Corporation (NASDAQ:IBCP). We will take a look at Xeris Pharmaceuticals, Inc. (NASDAQ:XERS), Guaranty Bancshares, Inc. (NASDAQ:GNTY), Anavex Life Sciences Corp. (NASDAQ:AVXL), Bridgewater Bancshares, Inc. (NASDAQ:BWB), Yiren Digital Ltd. (NYSE:YRD), Preferred Apartment Communities Inc. (NYSE:APTS), and Hess Midstream LP (NYSE:HESM). All of these stocks’ market caps resemble IBCP’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 5.9 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $25 million in IBCP’s case. Xeris Pharmaceuticals, Inc. (NASDAQ:XERS) is the most popular stock in this table. On the other hand Guaranty Bancshares, Inc. (NASDAQ:GNTY) is the least popular one with only 2 bullish hedge fund positions. Independent Bank Corporation (NASDAQ:IBCP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IBCP is 81.9. 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. Hedge funds were also right about betting on IBCP as the stock returned 45.7% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.