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In this article we will take a look at whether hedge funds think BankUnited Inc (NYSE:BKU) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is BKU a good stock to buy now? BankUnited Inc (NYSE:BKU) shareholders have witnessed a decrease in support from the world's most elite money managers lately. BankUnited Inc (NYSE:BKU) was in 14 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 27. Our calculations also showed that BKU isn't among the 30 most popular stocks among hedge funds (click for Q3 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 66 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.
Donald Sussman of Paloma Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. With all of this in mind we're going to check out the fresh hedge fund action surrounding BankUnited Inc (NYSE:BKU).
Do Hedge Funds Think BKU Is A Good Stock To Buy Now?
At the end of September, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BKU over the last 21 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Diamond Hill Capital was the largest shareholder of BankUnited Inc (NYSE:BKU), with a stake worth $61.1 million reported as of the end of September. Trailing Diamond Hill Capital was Royce & Associates, which amassed a stake valued at $12.9 million. Arrowstreet Capital, GLG Partners, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Neo Ivy Capital allocated the biggest weight to BankUnited Inc (NYSE:BKU), around 0.79% of its 13F portfolio. Diamond Hill Capital is also relatively very bullish on the stock, earmarking 0.34 percent of its 13F equity portfolio to BKU.
Since BankUnited Inc (NYSE:BKU) has witnessed falling interest from the aggregate hedge fund industry, it's safe to say that there exists a select few funds that slashed their entire stakes heading into Q4. It's worth mentioning that Israel Englander's Millennium Management said goodbye to the biggest stake of all the hedgies tracked by Insider Monkey, comprising an estimated $11.5 million in stock. Mark Lee's fund, Forest Hill Capital, also said goodbye to its stock, about $5.1 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 2 funds heading into Q4.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as BankUnited Inc (NYSE:BKU) but similarly valued. These stocks are Bank of Hawaii Corporation (NYSE:BOH), Ryman Hospitality Properties, Inc. (NYSE:RHP), American Equity Investment Life Holding Company (NYSE:AEL), PacWest Bancorp (NASDAQ:PACW), Axonics Modulation Technologies, Inc. (NASDAQ:AXNX), Compass Minerals International, Inc. (NYSE:CMP), and Corcept Therapeutics Incorporated (NASDAQ:CORT). All of these stocks' market caps match BKU's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BOH,21,69967,3 RHP,24,405247,-1 AEL,12,37048,0 PACW,28,247992,4 AXNX,28,371489,2 CMP,14,67272,-4 CORT,22,238362,-1 Average,21.3,205340,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.3 hedge funds with bullish positions and the average amount invested in these stocks was $205 million. That figure was $104 million in BKU's case. PacWest Bancorp (NASDAQ:PACW) is the most popular stock in this table. On the other hand American Equity Investment Life Holding Company (NYSE:AEL) is the least popular one with only 12 bullish hedge fund positions. BankUnited Inc (NYSE:BKU) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BKU is 24.8. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on BKU as the stock returned 46.2% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.