How do we determine whether Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Hedge fund interest in Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI) 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 ACBI to other stocks including Carrols Restaurant Group, Inc. (NASDAQ:TAST), Capital City Bank Group, Inc. (NASDAQ:CCBG), and SpartanNash Company (NASDAQ:SPTN) to get a better sense of its popularity. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike other investors who track every movement of the 25 largest hedge funds, our long-short investment strategy relies on hedge fund buy/sell signals given by the 100 best performing hedge funds. We're going to review the recent hedge fund action surrounding Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI).
Hedge fund activity in Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI)
At Q2's end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in ACBI over the last 16 quarters. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
[caption id="attachment_758440" align="aligncenter" width="450"] Michael Price of MFP Investors[/caption]
More specifically, Mendon Capital Advisors was the largest shareholder of Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI), with a stake worth $17.1 million reported as of the end of March. Trailing Mendon Capital Advisors was MFP Investors, which amassed a stake valued at $16.3 million. Elizabeth Park Capital Management, Renaissance Technologies, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was AQR Capital Management).
Let's now take a look at hedge fund activity in other stocks similar to Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI). We will take a look at Carrols Restaurant Group, Inc. (NASDAQ:TAST), Capital City Bank Group, Inc. (NASDAQ:CCBG), SpartanNash Company (NASDAQ:SPTN), and Silvercorp Metals Inc. (NYSE:SVM). This group of stocks' market values are closest to ACBI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TAST,20,97829,1 CCBG,3,6505,-1 SPTN,20,27535,4 SVM,9,18803,0 Average,13,37668,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $75 million in ACBI's case. Carrols Restaurant Group, Inc. (NASDAQ:TAST) is the most popular stock in this table. On the other hand Capital City Bank Group, Inc. (NASDAQ:CCBG) is the least popular one with only 3 bullish hedge fund positions. Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ACBI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ACBI investors were disappointed as the stock returned 1.3% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.