We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like ServisFirst Bancshares, Inc. (NASDAQ:SFBS).
Is ServisFirst Bancshares, Inc. (NASDAQ:SFBS) a buy, sell, or hold? Prominent investors are in a pessimistic mood. The number of long hedge fund bets went down by 1 lately. Our calculations also showed that SFBS isn’t among the 30 most popular stocks among hedge funds (see the video below).
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a peek at the new hedge fund action regarding ServisFirst Bancshares, Inc. (NASDAQ:SFBS).
What have hedge funds been doing with ServisFirst Bancshares, Inc. (NASDAQ:SFBS)?
Heading into the third quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in SFBS over the last 16 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Citadel Investment Group was the largest shareholder of ServisFirst Bancshares, Inc. (NASDAQ:SFBS), with a stake worth $4.2 million reported as of the end of March. Trailing Citadel Investment Group was Fisher Asset Management, which amassed a stake valued at $2.9 million. Interval Partners, Renaissance Technologies, and GAMCO Investors were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that ServisFirst Bancshares, Inc. (NASDAQ:SFBS) has faced bearish sentiment from the smart money, it’s easy to see that there were a few hedgies who sold off their entire stakes by the end of the second quarter. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dumped the biggest position of the “upper crust” of funds watched by Insider Monkey, worth an estimated $1.3 million in stock, and Chuck Royce’s Royce & Associates was right behind this move, as the fund said goodbye to about $1 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds by the end of the second quarter.
Let’s go over hedge fund activity in other stocks similar to ServisFirst Bancshares, Inc. (NASDAQ:SFBS). We will take a look at Goosehead Insurance, Inc. (NASDAQ:GSHD), Portola Pharmaceuticals Inc (NASDAQ:PTLA), PennyMac Financial Services Inc (NYSE:PFSI), and SJW Group (NYSE:SJW). This group of stocks’ market values match SFBS’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 14 hedge funds with bullish positions and the average amount invested in these stocks was $142 million. That figure was $13 million in SFBS’s case. Portola Pharmaceuticals Inc (NASDAQ:PTLA) is the most popular stock in this table. On the other hand Goosehead Insurance, Inc. (NASDAQ:GSHD) is the least popular one with only 7 bullish hedge fund positions. ServisFirst Bancshares, Inc. (NASDAQ:SFBS) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately SFBS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SFBS investors were disappointed as the stock returned -2.8% during the third quarter 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 in 2019.
Disclosure: None. This article was originally published at Insider Monkey.