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Is Investar Holding Corporation (ISTR) Going to Burn These Hedge Funds?

We can judge whether Investar Holding Corporation (NASDAQ:ISTR) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.

Is Investar Holding Corporation (NASDAQ:ISTR) a buy here? Money managers are taking an optimistic view. The number of bullish hedge fund bets advanced by 1 recently. Our calculations also showed that ISTR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Chuck Royce

Chuck Royce of Royce & Associates

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to take a gander at the latest hedge fund action regarding Investar Holding Corporation (NASDAQ:ISTR).

Hedge fund activity in Investar Holding Corporation (NASDAQ:ISTR)

At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the second quarter of 2019. On the other hand, there were a total of 5 hedge funds with a bullish position in ISTR a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Among these funds, EJF Capital held the most valuable stake in Investar Holding Corporation (NASDAQ:ISTR), which was worth $9.5 million at the end of the third quarter. On the second spot was Forest Hill Capital which amassed $6.8 million worth of shares. Mendon Capital Advisors, Royce & Associates, 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 Forest Hill Capital allocated the biggest weight to Investar Holding Corporation (NASDAQ:ISTR), around 2.4% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, setting aside 1.3 percent of its 13F equity portfolio to ISTR.

Consequently, key hedge funds have been driving this bullishness. Millennium Management, managed by Israel Englander, initiated the most outsized position in Investar Holding Corporation (NASDAQ:ISTR). Millennium Management had $0.3 million invested in the company at the end of the quarter.

Let’s also examine hedge fund activity in other stocks similar to Investar Holding Corporation (NASDAQ:ISTR). We will take a look at MannKind Corporation (NASDAQ:MNKD), RGC Resources, Inc. (NASDAQ:RGCO), U.S. Xpress Enterprises, Inc. (NYSE:USX), and Evofem Biosciences, Inc. (NASDAQ:EVFM). All of these stocks’ market caps are similar to ISTR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MNKD 6 6736 0
RGCO 1 804 0
USX 10 19479 2
EVFM 4 63652 3
Average 5.25 22668 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $27 million in ISTR’s case. U.S. Xpress Enterprises, Inc. (NYSE:USX) is the most popular stock in this table. On the other hand RGC Resources, Inc. (NASDAQ:RGCO) is the least popular one with only 1 bullish hedge fund positions. Investar Holding Corporation (NASDAQ:ISTR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ISTR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ISTR were disappointed as the stock returned 5.4% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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