A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on South Plains Financial, Inc. (NASDAQ:SPFI).
Is South Plains Financial, Inc. (NASDAQ:SPFI) undervalued? Money managers are taking a bearish view. The number of long hedge fund positions went down by 1 in recent months. Our calculations also showed that SPFI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 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 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.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a glance at the recent hedge fund action regarding South Plains Financial, Inc. (NASDAQ:SPFI).
How are hedge funds trading South Plains Financial, Inc. (NASDAQ:SPFI)?
Heading into the fourth quarter of 2019, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position in SPFI a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in South Plains Financial, Inc. (NASDAQ:SPFI) was held by Mendon Capital Advisors, which reported holding $4.1 million worth of stock at the end of September. It was followed by Polaris Capital Management with a $3.4 million position. Other investors bullish on the company included Millennium Management, Azora Capital, and MFP Investors. In terms of the portfolio weights assigned to each position Mendon Capital Advisors allocated the biggest weight to South Plains Financial, Inc. (NASDAQ:SPFI), around 0.69% of its 13F portfolio. Azora Capital is also relatively very bullish on the stock, setting aside 0.18 percent of its 13F equity portfolio to SPFI.
Due to the fact that South Plains Financial, Inc. (NASDAQ:SPFI) has witnessed a decline in interest from hedge fund managers, it’s easy to see that there is a sect of fund managers that elected to cut their positions entirely by the end of the third quarter. It’s worth mentioning that John Overdeck and David Siegel’s Two Sigma Advisors said goodbye to the largest stake of all the hedgies followed by Insider Monkey, comprising about $0.3 million in stock, and Daniel Johnson’s Gillson Capital was right behind this move, as the fund dumped about $0.2 million worth. These transactions are important to note, as total hedge fund interest was cut by 1 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks similar to South Plains Financial, Inc. (NASDAQ:SPFI). We will take a look at Nesco Holdings, Inc. (NYSE:NSCO), DRDGOLD Limited (NYSE:DRD), Rimini Street, Inc. (NASDAQ:RMNI), and SmartFinancial, Inc. (NASDAQ:SMBK). This group of stocks’ market values are similar to SPFI’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 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $11 million in SPFI’s case. Nesco Holdings, Inc. (NYSE:NSCO) is the most popular stock in this table. On the other hand DRDGOLD Limited (NYSE:DRD) is the least popular one with only 4 bullish hedge fund positions. South Plains Financial, Inc. (NASDAQ:SPFI) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on SPFI as the stock returned 16.6% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.