Is IBOC A Good Stock To Buy Now?

In this article we will take a look at whether hedge funds think International Bancshares Corp (NASDAQ:IBOC) 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 IBOC a good stock to buy now? The best stock pickers were becoming hopeful. The number of bullish hedge fund bets advanced by 2 lately. International Bancshares Corp (NASDAQ:IBOC) was in 19 hedge funds’ portfolios at the end of September. The all time high for this statistic is 20. Our calculations also showed that IBOC 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.

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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Bernard Horn of Polaris Capital Management

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. Now let’s go over the key hedge fund action encompassing International Bancshares Corp (NASDAQ:IBOC).

Do Hedge Funds Think IBOC Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards IBOC over the last 21 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

The largest stake in International Bancshares Corp (NASDAQ:IBOC) was held by Polaris Capital Management, which reported holding $35.5 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $9.9 million position. Other investors bullish on the company included Balyasny Asset Management, Azora Capital, and D E Shaw. In terms of the portfolio weights assigned to each position Polaris Capital Management allocated the biggest weight to International Bancshares Corp (NASDAQ:IBOC), around 1.75% of its 13F portfolio. Azora Capital is also relatively very bullish on the stock, dishing out 0.73 percent of its 13F equity portfolio to IBOC.

Now, specific money managers have been driving this bullishness. Tudor Investment Corp, managed by Paul Tudor Jones, established the most outsized position in International Bancshares Corp (NASDAQ:IBOC). Tudor Investment Corp had $0.9 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $0.2 million position during the quarter. The only other fund with a brand new IBOC position is Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as International Bancshares Corp (NASDAQ:IBOC) but similarly valued. These stocks are Walker & Dunlop Inc. (NYSE:WD), Madison Square Garden Entertainment Corp. (NYSE:MSGE), Veoneer, Inc. (NYSE:VNE), Pebblebrook Hotel Trust (NYSE:PEB), Mueller Water Products, Inc. (NYSE:MWA), Navient Corp (NASDAQ:NAVI), and Uniqure NV (NASDAQ:QURE). This group of stocks’ market valuations match IBOC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WD 17 72026 -1
MSGE 34 376412 -4
VNE 10 128887 -4
PEB 9 64842 -4
MWA 24 220024 3
NAVI 22 167531 -5
QURE 36 488681 -13
Average 21.7 216915 -4

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.7 hedge funds with bullish positions and the average amount invested in these stocks was $217 million. That figure was $77 million in IBOC’s case. Uniqure NV (NASDAQ:QURE) is the most popular stock in this table. On the other hand Pebblebrook Hotel Trust (NYSE:PEB) is the least popular one with only 9 bullish hedge fund positions. International Bancshares Corp (NASDAQ:IBOC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for IBOC is 54. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on IBOC as the stock returned 33.2% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.

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