We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards SVB Financial Group (NASDAQ:SIVB) and determine whether hedge funds skillfully traded this stock.
SVB Financial Group (NASDAQ:SIVB) investors should pay attention to a decrease in support from the world's most elite money managers recently. SVB Financial Group (NASDAQ:SIVB) was in 26 hedge funds' portfolios at the end of June. The all time high for this statistics is 42. There were 30 hedge funds in our database with SIVB holdings at the end of March. Our calculations also showed that SIVB isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
In the 21st century investor’s toolkit there are a large number of tools stock market investors have at their disposal to analyze publicly traded companies. A duo of the best tools are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the best money managers can outclass the market by a significant amount (see the details here).
Lee Ainslie of Maverick Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now let's take a look at the fresh hedge fund action surrounding SVB Financial Group (NASDAQ:SIVB).
What does smart money think about SVB Financial Group (NASDAQ:SIVB)?
At the end of the second quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SIVB over the last 20 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the biggest position in SVB Financial Group (NASDAQ:SIVB). Fisher Asset Management has a $162.2 million position in the stock, comprising 0.2% of its 13F portfolio. The second most bullish fund manager is Diamond Hill Capital, managed by Ric Dillon, which holds a $86.9 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions encompass Cliff Asness's AQR Capital Management, Principal Global Investors's Columbus Circle Investors and Phill Gross and Robert Atchinson's Adage Capital Management. In terms of the portfolio weights assigned to each position MD Sass allocated the biggest weight to SVB Financial Group (NASDAQ:SIVB), around 2.28% of its 13F portfolio. Columbus Circle Investors is also relatively very bullish on the stock, setting aside 1.69 percent of its 13F equity portfolio to SIVB.
Because SVB Financial Group (NASDAQ:SIVB) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there exists a select few fund managers who sold off their entire stakes last quarter. Interestingly, David E. Winebrenner's Spindletop Capital dropped the largest investment of the 750 funds watched by Insider Monkey, comprising close to $10.6 million in stock. Greg Eisner's fund, Engineers Gate Manager, also dumped its stock, about $2.3 million worth. These transactions are interesting, as total hedge fund interest fell by 4 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to SVB Financial Group (NASDAQ:SIVB). These stocks are Jacobs Engineering Group Inc. (NYSE:J), UDR, Inc. (NYSE:UDR), Lumen Technologies, Inc. (NYSE:CTL), E*TRADE Financial Corporation (NASDAQ:ETFC), Wabtec Corporation (NYSE:WAB), Logitech International SA (NASDAQ:LOGI), and Nordson Corporation (NASDAQ:NDSN). This group of stocks' market values match SIVB's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position J,32,1047013,4 UDR,29,389036,10 CTL,30,788387,-4 ETFC,36,1370357,-1 WAB,39,1528246,-2 LOGI,13,277342,-2 NDSN,21,67604,-1 Average,28.6,781141,0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.6 hedge funds with bullish positions and the average amount invested in these stocks was $781 million. That figure was $456 million in SIVB's case. Wabtec Corporation (NYSE:WAB) is the most popular stock in this table. On the other hand Logitech International SA (NASDAQ:LOGI) is the least popular one with only 13 bullish hedge fund positions. SVB Financial Group (NASDAQ:SIVB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SIVB is 44.6. 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. 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 21.3% in 2020 through September 25th and surpassed the market by 17.7 percentage points. Unfortunately SIVB wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SIVB investors were disappointed as the stock returned 6.5% since Q2 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.