Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards BancorpSouth Bank (NYSE:BXS).
Is BXS a good stock to buy now? BancorpSouth Bank (NYSE:BXS) has experienced an increase in hedge fund sentiment lately. BancorpSouth Bank (NYSE:BXS) was in 19 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 15. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that BXS 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. Keeping this in mind let's take a gander at the latest hedge fund action surrounding BancorpSouth Bank (NYSE:BXS).
Do Hedge Funds Think BXS Is A Good Stock To Buy Now?
At Q3's end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 90% from the second quarter of 2020. On the other hand, there were a total of 14 hedge funds with a bullish position in BXS a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Fisher Asset Management held the most valuable stake in BancorpSouth Bank (NYSE:BXS), which was worth $17 million at the end of the third quarter. On the second spot was GLG Partners which amassed $4.9 million worth of shares. Interval Partners, Millennium Management, and Citadel Investment Group 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 Interval Partners allocated the biggest weight to BancorpSouth Bank (NYSE:BXS), around 0.19% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, designating 0.05 percent of its 13F equity portfolio to BXS.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, created the largest position in BancorpSouth Bank (NYSE:BXS). Citadel Investment Group had $1.6 million invested in the company at the end of the quarter. Brandon Haley's Holocene Advisors also made a $0.6 million investment in the stock during the quarter. The following funds were also among the new BXS investors: Dmitry Balyasny's Balyasny Asset Management, Donald Sussman's Paloma Partners, and Paul Tudor Jones's Tudor Investment Corp.
Let's go over hedge fund activity in other stocks similar to BancorpSouth Bank (NYSE:BXS). We will take a look at Insight Enterprises, Inc. (NASDAQ:NSIT), Lions Gate Entertainment Corporation (NYSE:LGF-B), BRP Group, Inc. (NASDAQ:BRP), Materialise NV (NASDAQ:MTLS), FS KKR Capital Corp. (NYSE:FSK), Sprout Social, Inc. (NASDAQ:SPT), and Osisko Gold Royalties Ltd (NYSE:OR). This group of stocks' market caps are closest to BXS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NSIT,22,66764,2 LGF-B,22,246159,-4 BRP,10,45833,-6 MTLS,5,7404,1 FSK,11,89179,0 SPT,18,126704,-1 OR,17,243791,2 Average,15,117976,-0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $118 million. That figure was $33 million in BXS's case. Insight Enterprises, Inc. (NASDAQ:NSIT) is the most popular stock in this table. On the other hand Materialise NV (NASDAQ:MTLS) is the least popular one with only 5 bullish hedge fund positions. BancorpSouth Bank (NYSE:BXS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BXS is 81.2. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on BXS as the stock returned 44% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
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