Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 835 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider Seacoast Banking Corporation of Florida (NASDAQ:SBCF) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Seacoast Banking Corporation of Florida (NASDAQ:SBCF) was in 8 hedge funds’ portfolios at the end of December. SBCF investors should be aware of an increase in activity from the world’s largest hedge funds of late. There were 6 hedge funds in our database with SBCF holdings at the end of the previous quarter. Our calculations also showed that SBCF isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 41 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.
Dmitry Balyasny of Balyasny Asset Management
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s check out the new hedge fund action encompassing Seacoast Banking Corporation of Florida (NASDAQ:SBCF).
Hedge fund activity in Seacoast Banking Corporation of Florida (NASDAQ:SBCF)
Heading into the first quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SBCF over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Among these funds, Millennium Management held the most valuable stake in Seacoast Banking Corporation of Florida (NASDAQ:SBCF), which was worth $28.5 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $10.6 million worth of shares. Mendon Capital Advisors, Arrowstreet Capital, and Balyasny Asset Management 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 Mendon Capital Advisors allocated the biggest weight to Seacoast Banking Corporation of Florida (NASDAQ:SBCF), around 1.29% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.09 percent of its 13F equity portfolio to SBCF.
Consequently, specific money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the most outsized position in Seacoast Banking Corporation of Florida (NASDAQ:SBCF). Arrowstreet Capital had $1.5 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $1.1 million position during the quarter. The only other fund with a brand new SBCF position is Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s go over hedge fund activity in other stocks similar to Seacoast Banking Corporation of Florida (NASDAQ:SBCF). We will take a look at STAAR Surgical Company (NASDAQ:STAA), SFL Corporation Ltd. (NYSE:SFL), Comstock Resources Inc (NYSE:CRK), and Enerpac Tool Group Corp. (NYSE:EPAC). This group of stocks’ market values are closest to SBCF’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STAA | 23 | 612599 | 8 |
| SFL | 14 | 89602 | 0 |
| CRK | 7 | 3882 | 2 |
| EPAC | 20 | 314293 | 9 |
| Average | 16 | 255094 | 4.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $255 million. That figure was $51 million in SBCF’s case. STAAR Surgical Company (NASDAQ:STAA) is the most popular stock in this table. On the other hand Comstock Resources Inc (NYSE:CRK) is the least popular one with only 7 bullish hedge fund positions. Seacoast Banking Corporation of Florida (NASDAQ:SBCF) 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately SBCF wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SBCF investors were disappointed as the stock returned -43.9% during the same time period 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 most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
