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Were Hedge Funds Right About Souring On Glacier Bancorp, Inc. (GBCI)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (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. In this article, we will take a closer look at hedge fund sentiment towards Glacier Bancorp, Inc. (NASDAQ:GBCI) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Glacier Bancorp, Inc. (NASDAQ:GBCI) investors should pay attention to a decrease in enthusiasm from smart money of late. GBCI was in 12 hedge funds’ portfolios at the end of the first quarter of 2020. There were 13 hedge funds in our database with GBCI positions at the end of the previous quarter. Our calculations also showed that GBCI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 58 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.

Ken Fisher FISHER ASSET MANAGEMENT

Ken Fisher of Fisher Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a gander at the key hedge fund action regarding Glacier Bancorp, Inc. (NASDAQ:GBCI).

Hedge fund activity in Glacier Bancorp, Inc. (NASDAQ:GBCI)

At Q1’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the fourth quarter of 2019. By comparison, 12 hedge funds held shares or bullish call options in GBCI a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Glacier Bancorp, Inc. (NASDAQ:GBCI) was held by Fisher Asset Management, which reported holding $20.4 million worth of stock at the end of September. It was followed by Forest Hill Capital with a $4 million position. Other investors bullish on the company included Citadel Investment Group, GLG Partners, and Balyasny Asset Management. In terms of the portfolio weights assigned to each position Forest Hill Capital allocated the biggest weight to Glacier Bancorp, Inc. (NASDAQ:GBCI), around 2.13% of its 13F portfolio. Neo Ivy Capital is also relatively very bullish on the stock, designating 0.26 percent of its 13F equity portfolio to GBCI.

Seeing as Glacier Bancorp, Inc. (NASDAQ:GBCI) has faced falling interest from the entirety of the hedge funds we track, we can see that there were a few fund managers who sold off their entire stakes last quarter. Intriguingly, Cliff Asness’s AQR Capital Management dumped the largest position of the 750 funds monitored by Insider Monkey, totaling an estimated $0.3 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund sold off about $0.2 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 1 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Glacier Bancorp, Inc. (NASDAQ:GBCI). These stocks are ALLETE Inc (NYSE:ALE), Flowserve Corporation (NYSE:FLS), MorphoSys AG (NASDAQ:MOR), and Echostar Corporation (NASDAQ:SATS). All of these stocks’ market caps are closest to GBCI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALE 18 147349 -7
FLS 29 181471 3
MOR 5 14705 -1
SATS 24 428894 -2
Average 19 193105 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $193 million. That figure was $36 million in GBCI’s case. Flowserve Corporation (NYSE:FLS) is the most popular stock in this table. On the other hand MorphoSys AG (NASDAQ:MOR) is the least popular one with only 5 bullish hedge fund positions. Glacier Bancorp, Inc. (NASDAQ:GBCI) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately GBCI wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); GBCI investors were disappointed as the stock returned 4.7% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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