Were Hedge Funds Right About SVB Financial Group (SIVB)?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding SVB Financial Group (NASDAQ:SIVB).

Hedge fund interest in SVB Financial Group (NASDAQ:SIVB) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SIVB isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare SIVB to other stocks including Public Service Enterprise Group Incorporated (NYSE:PEG), Sun Life Financial Inc. (NYSE:SLF), and Ecopetrol S.A. (NYSE:EC) to get a better sense of its popularity.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a gander at the latest hedge fund action encompassing SVB Financial Group (NASDAQ:SIVB).

Do Hedge Funds Think SIVB Is A Good Stock To Buy Now?

At Q2’s end, a total of 49 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SIVB over the last 24 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the most valuable position in SVB Financial Group (NASDAQ:SIVB). Fisher Asset Management has a $358.5 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Diamond Hill Capital, managed by Ric Dillon, which holds a $120.7 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions contain Cliff Asness’s AQR Capital Management, and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Azora Capital allocated the biggest weight to SVB Financial Group (NASDAQ:SIVB), around 3.46% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, earmarking 1.99 percent of its 13F equity portfolio to SIVB.

Seeing as SVB Financial Group (NASDAQ:SIVB) has witnessed falling interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few hedgies that slashed their positions entirely by the end of the second quarter. At the top of the heap, Frank Fu’s CaaS Capital said goodbye to the biggest position of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $31.6 million in stock, and Joseph Samuels’s Islet Management was right behind this move, as the fund cut about $30.5 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as SVB Financial Group (NASDAQ:SIVB) but similarly valued. These stocks are Public Service Enterprise Group Incorporated (NYSE:PEG), Sun Life Financial Inc. (NYSE:SLF), Ecopetrol S.A. (NYSE:EC), Nokia Corporation (NYSE:NOK), Nasdaq, Inc. (NASDAQ:NDAQ), Fastenal Company (NASDAQ:FAST), and Willis Towers Watson Public Limited Company (NASDAQ:WLTW). All of these stocks’ market caps are similar to SIVB’s market cap.

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As you can see these stocks had an average of 26.7 hedge funds with bullish positions and the average amount invested in these stocks was $1073 million. That figure was $1039 million in SIVB’s case. Willis Towers Watson Public Limited Company (NASDAQ:WLTW) is the most popular stock in this table. On the other hand Ecopetrol S.A. (NYSE:EC) is the least popular one with only 6 bullish hedge fund positions. SVB Financial Group (NASDAQ:SIVB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SIVB is 68.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 through November 5th and still beat the market by 3.1 percentage points. Hedge funds were also right about betting on SIVB as the stock returned 34.3% since the end of Q2 (through 11/5) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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