Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors' favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the third quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds' top consensus picks. This year hedge funds' top 20 stock picks outperformed the S&P 500 Index by 9.9 percentage points through the end of November. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Simmons First National Corporation (NASDAQ:SFNC) has experienced a decrease in support from the world's most elite money managers recently. Our calculations also showed that SFNC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are a lot of gauges stock market investors employ to size up stocks. A duo of the best gauges are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the best investment managers can outpace the market by a healthy margin (see the details here).
[caption id="attachment_745225" align="aligncenter" width="1613"] Noam Gottesman of GLG Partners[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We're going to take a look at the fresh hedge fund action encompassing Simmons First National Corporation (NASDAQ:SFNC).
What have hedge funds been doing with Simmons First National Corporation (NASDAQ:SFNC)?
Heading into the fourth quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the second quarter of 2019. On the other hand, there were a total of 9 hedge funds with a bullish position in SFNC a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Simmons First National Corporation (NASDAQ:SFNC) was held by Arrowstreet Capital, which reported holding $15.6 million worth of stock at the end of September. It was followed by D E Shaw with a $6 million position. Other investors bullish on the company included Citadel Investment Group, GLG Partners, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Arrowstreet Capital allocated the biggest weight to Simmons First National Corporation (NASDAQ:SFNC), around 0.04% of its 13F portfolio. GLG Partners is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to SFNC.
Seeing as Simmons First National Corporation (NASDAQ:SFNC) has experienced a decline in interest from the smart money, it's easy to see that there is a sect of hedgies that slashed their positions entirely by the end of the third quarter. At the top of the heap, Paul Marshall and Ian Wace's Marshall Wace dumped the biggest investment of all the hedgies tracked by Insider Monkey, totaling an estimated $2.8 million in stock. Dmitry Balyasny's fund, Balyasny Asset Management, also cut its stock, about $0.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 2 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Simmons First National Corporation (NASDAQ:SFNC) but similarly valued. We will take a look at Lexington Realty Trust (NYSE:LXP), ABM Industries, Inc. (NYSE:ABM), Argo Group International Holdings, Ltd. (NYSE:ARGO), and Acadia Realty Trust (NYSE:AKR). All of these stocks' market caps are similar to SFNC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LXP,13,108269,1 ABM,14,53080,4 ARGO,15,196940,-4 AKR,15,77892,2 Average,14.25,109045,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $32 million in SFNC's case. Argo Group International Holdings, Ltd. (NYSE:ARGO) is the most popular stock in this table. On the other hand Lexington Realty Trust (NYSE:LXP) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Simmons First National Corporation (NASDAQ:SFNC) is even less popular than LXP. Hedge funds dodged a bullet by taking a bearish stance towards SFNC. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SFNC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SFNC investors were disappointed as the stock returned 4.1% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.