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In this article we will check out the progression of hedge fund sentiment towards Business First Bancshares, Inc. (NASDAQ:BFST) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Business First Bancshares, Inc. (NASDAQ:BFST) shareholders have witnessed an increase in hedge fund sentiment recently. Our calculations also showed that BFST isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 44 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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Ken Griffin of Citadel Investment Group[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's take a glance at the recent hedge fund action surrounding Business First Bancshares, Inc. (NASDAQ:BFST).
Hedge fund activity in Business First Bancshares, Inc. (NASDAQ:BFST)
At Q1's end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the previous quarter. On the other hand, there were a total of 1 hedge funds with a bullish position in BFST a year ago. With the smart money's sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, EJF Capital, managed by Emanuel J. Friedman, holds the number one position in Business First Bancshares, Inc. (NASDAQ:BFST). EJF Capital has a $7.7 million position in the stock, comprising 1.6% of its 13F portfolio. Sitting at the No. 2 spot is Mendon Capital Advisors, managed by Anton Schutz, which holds a $0.5 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism contain Renaissance Technologies, Ken Griffin's Citadel Investment Group and . In terms of the portfolio weights assigned to each position EJF Capital allocated the biggest weight to Business First Bancshares, Inc. (NASDAQ:BFST), around 1.62% of its 13F portfolio. Mendon Capital Advisors is also relatively very bullish on the stock, earmarking 0.24 percent of its 13F equity portfolio to BFST.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, assembled the biggest position in Business First Bancshares, Inc. (NASDAQ:BFST). Citadel Investment Group had $0.2 million invested in the company at the end of the quarter.
Let's also examine hedge fund activity in other stocks similar to Business First Bancshares, Inc. (NASDAQ:BFST). These stocks are Gold Resource Corporation (NYSE:GORO), Donnelley Financial Solutions, Inc. (NYSE:DFIN), CapStar Financial Holdings, Inc. (NASDAQ:CSTR), and Cabaletta Bio, Inc. (NASDAQ:CABA). This group of stocks' market values are closest to BFST's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GORO,6,3215,1 DFIN,18,27554,-4 CSTR,10,7454,5 CABA,9,69313,2 Average,10.75,26884,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $9 million in BFST's case. Donnelley Financial Solutions, Inc. (NYSE:DFIN) is the most popular stock in this table. On the other hand Gold Resource Corporation (NYSE:GORO) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Business First Bancshares, Inc. (NASDAQ:BFST) is even less popular than GORO. Hedge funds dodged a bullet by taking a bearish stance towards BFST. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately BFST wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); BFST investors were disappointed as the stock returned 8.3% during the second quarter (through the end of May) 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 so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.