Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze State Bank Financial Corp (NASDAQ:STBZ) from the perspective of those successful funds.
State Bank Financial Corp (NASDAQ:STBZ) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 12 hedge funds’ portfolios at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Vascular Solutions, Inc. (NASDAQ:VASC), Fox Factory Holding Corp (NASDAQ:FOXF), and SPX Corporation (NYSE:SPXC) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Keeping this in mind, we’re going to check out the recent action surrounding State Bank Financial Corp (NASDAQ:STBZ).
What does the smart money think about State Bank Financial Corp (NASDAQ:STBZ)?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2016. By comparison, 12 hedge funds held shares or bullish call options in STBZ heading into this year. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Robert Pohly’s Samlyn Capital has the largest position in State Bank Financial Corp (NASDAQ:STBZ), worth close to $25.1 million, corresponding to 0.6% of its total 13F portfolio. The second most bullish fund manager is EJF Capital, led by Emanuel J. Friedman, holding a $24.8 million position; 2% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish comprise Gregg J. Powers’s Private Capital Management, Chuck Royce’s Royce & Associates and Ric Dillon’s Diamond Hill Capital. We should note that none of these elite funds are among our list of the 100 best performing elite funds which is based on the performance of their 13F long positions in non-microcap stocks.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now review hedge fund activity in other stocks similar to State Bank Financial Corp (NASDAQ:STBZ). These stocks are Vascular Solutions, Inc. (NASDAQ:VASC), Fox Factory Holding Corp (NASDAQ:FOXF), SPX Corporation (NYSE:SPXC), and Wingstop Inc (NASDAQ:WING). This group of stocks’ market caps are similar to STBZ’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $64 million. That figure was $99 million in STBZ’s case. SPX Corporation (NYSE:SPXC) is the most popular stock in this table. On the other hand Fox Factory Holding Corp (NASDAQ:FOXF) is the least popular one with only 9 bullish hedge fund positions. State Bank Financial Corp (NASDAQ:STBZ) is not the least popular stock in this group but hedge fund interest is just average. This is a neutral signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard SPXC might be a better candidate to consider taking a long position in.