Is Cadence Bancorporation (NYSE:CADE) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Cadence Bancorporation (NYSE:CADE) has experienced a decrease in hedge fund sentiment recently. CADE was in 18 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 19 hedge funds in our database with CADE positions at the end of the previous quarter. Our calculations also showed that CADE isn't among the 30 most popular stocks among hedge funds.
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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's analyze the latest hedge fund action encompassing Cadence Bancorporation (NYSE:CADE).
What have hedge funds been doing with Cadence Bancorporation (NYSE:CADE)?
At Q4's end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CADE over the last 14 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.
More specifically, Diamond Hill Capital was the largest shareholder of Cadence Bancorporation (NYSE:CADE), with a stake worth $32.5 million reported as of the end of December. Trailing Diamond Hill Capital was Levin Capital Strategies, which amassed a stake valued at $22.5 million. Two Sigma Advisors, Marshall Wace LLP, and Chilton Investment Company were also very fond of the stock, giving the stock large weights in their portfolios.
Because Cadence Bancorporation (NYSE:CADE) has experienced a decline in interest from the aggregate hedge fund industry, it's easy to see that there were a few money managers that decided to sell off their positions entirely by the end of the third quarter. Interestingly, Jeffrey Talpins's Element Capital Management sold off the largest position of the 700 funds monitored by Insider Monkey, worth an estimated $27 million in stock, and D. E. Shaw's D E Shaw was right behind this move, as the fund said goodbye to about $17.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 1 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Cadence Bancorporation (NYSE:CADE) but similarly valued. We will take a look at Qudian Inc. (NYSE:QD), Gentherm Inc (NASDAQ:THRM), Independent Bank Group Inc (NASDAQ:IBTX), and Central Puerto S.A. (NYSE:CEPU). This group of stocks' market caps are closest to CADE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QD,15,14376,9 THRM,17,80419,4 IBTX,13,98991,2 CEPU,8,33956,-1 Average,13.25,56936,3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $118 million in CADE's case. Gentherm Inc (NASDAQ:THRM) is the most popular stock in this table. On the other hand Central Puerto S.A. (NYSE:CEPU) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Cadence Bancorporation (NYSE:CADE) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on CADE, though not to the same extent, as the stock returned 21.7% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.