U.S. Markets open in 6 hrs 11 mins

American National BankShares Inc (AMNB): Hedge Funds In Wait-and-See Mode

Asma UL Husna

Does American National BankShares Inc (NASDAQ:AMNB) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

Hedge fund interest in American National BankShares Inc (NASDAQ:AMNB) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare AMNB to other stocks including Insteel Industries Inc (NASDAQ:IIIN), ChemoCentryx Inc (NASDAQ:CCXI), and Willdan Group, Inc. (NASDAQ:WLDN) to get a better sense of its popularity.

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' 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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_26073" align="aligncenter" width="450"] Jim Simons Founder of RENAISSANCE TECHNOLOGIES[/caption]

RENAISSANCE TECHNOLOGIES

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a peek at the recent hedge fund action surrounding American National BankShares Inc (NASDAQ:AMNB).

What does smart money think about American National BankShares Inc (NASDAQ:AMNB)?

At Q3's end, a total of 2 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in AMNB over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

AMNB_nov2019

Among these funds, Renaissance Technologies held the most valuable stake in American National BankShares Inc (NASDAQ:AMNB), which was worth $6.3 million at the end of the third quarter. On the second spot was Castine Capital Management which amassed $2.9 million worth of shares.

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 go over hedge fund activity in other stocks similar to American National BankShares Inc (NASDAQ:AMNB). We will take a look at Insteel Industries Inc (NASDAQ:IIIN), ChemoCentryx Inc (NASDAQ:CCXI), Willdan Group, Inc. (NASDAQ:WLDN), and BioSpecifics Technologies Corp. (NASDAQ:BSTC). This group of stocks' market valuations are closest to AMNB's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IIIN,3,40438,-3 CCXI,17,64755,0 WLDN,6,9610,1 BSTC,12,58911,1 Average,9.5,43429,-0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $9 million in AMNB's case. ChemoCentryx Inc (NASDAQ:CCXI) is the most popular stock in this table. On the other hand Insteel Industries Inc (NASDAQ:IIIN) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks American National BankShares Inc (NASDAQ:AMNB) is even less popular than IIIN. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. A small number of hedge funds were also right about betting on AMNB, though not to the same extent, as the stock returned 5.9% during the fourth quarter (through 11/22) and outperformed the market as well.

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

Related Content