There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don't cover. Because of Carl Icahn and other elite funds' exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze CenterState Bank Corporation (NASDAQ:CSFL).
Is CenterState Bank Corporation (NASDAQ:CSFL) a bargain? Money managers are taking a pessimistic view. The number of bullish hedge fund positions retreated by 4 lately. Our calculations also showed that CSFL isn't among the 30 most popular stocks among hedge funds. CSFL was in 16 hedge funds' portfolios at the end of the first quarter of 2019. There were 20 hedge funds in our database with CSFL holdings at the end of the previous quarter.
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' 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 40 percentage points since May 2014 through May 30, 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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's review the fresh hedge fund action surrounding CenterState Bank Corporation (NASDAQ:CSFL).
Hedge fund activity in CenterState Bank Corporation (NASDAQ:CSFL)
At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in CSFL a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in CenterState Bank Corporation (NASDAQ:CSFL), which was worth $38.3 million at the end of the first quarter. On the second spot was Millennium Management which amassed $23.7 million worth of shares. Moreover, Marshall Wace LLP, Royce & Associates, and Forest Hill Capital were also bullish on CenterState Bank Corporation (NASDAQ:CSFL), allocating a large percentage of their portfolios to this stock.
Because CenterState Bank Corporation (NASDAQ:CSFL) has faced a decline in interest from the aggregate hedge fund industry, it's easy to see that there exists a select few money managers who sold off their positions entirely by the end of the third quarter. It's worth mentioning that Ken Griffin's Citadel Investment Group dropped the biggest investment of the 700 funds watched by Insider Monkey, valued at about $2.8 million in stock. Lawrence Seidman's fund, Seidman Investment Partnership, also cut its stock, about $1.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 4 funds by the end of the third quarter.
Let's now review hedge fund activity in other stocks similar to CenterState Bank Corporation (NASDAQ:CSFL). We will take a look at Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN), Independent Bank Corp (NASDAQ:INDB), PolyOne Corporation (NYSE:POL), and Washington Real Estate Investment Trust (NYSE:WRE). This group of stocks' market caps are closest to CSFL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BHVN,33,386094,11 INDB,6,7051,-3 POL,23,151231,4 WRE,9,89215,-5 Average,17.75,158398,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $158 million. That figure was $136 million in CSFL's case. Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) is the most popular stock in this table. On the other hand Independent Bank Corp (NASDAQ:INDB) is the least popular one with only 6 bullish hedge fund positions. CenterState Bank Corporation (NASDAQ:CSFL) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately CSFL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CSFL investors were disappointed as the stock returned -3.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.