At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Independent Bank Group Inc (NASDAQ:IBTX).
Independent Bank Group Inc (NASDAQ:IBTX) investors should pay attention to a decrease in hedge fund sentiment in recent months. IBTX was in 20 hedge funds' portfolios at the end of the first quarter of 2020. There were 23 hedge funds in our database with IBTX positions at the end of the previous quarter. Our calculations also showed that IBTX 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to review the new hedge fund action encompassing Independent Bank Group Inc (NASDAQ:IBTX).
What have hedge funds been doing with Independent Bank Group Inc (NASDAQ:IBTX)?
Heading into the second quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in IBTX over the last 18 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, Basswood Capital was the largest shareholder of Independent Bank Group Inc (NASDAQ:IBTX), with a stake worth $16.3 million reported as of the end of September. Trailing Basswood Capital was Renaissance Technologies, which amassed a stake valued at $11.5 million. Balyasny Asset Management, Millennium Management, and Azora Capital 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 Azora Capital allocated the biggest weight to Independent Bank Group Inc (NASDAQ:IBTX), around 2.68% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, dishing out 1.9 percent of its 13F equity portfolio to IBTX.
Because Independent Bank Group Inc (NASDAQ:IBTX) has experienced bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there is a sect of fund managers that decided to sell off their full holdings heading into Q4. Interestingly, Robert Emil Zoellner's Alpine Associates said goodbye to the largest position of all the hedgies tracked by Insider Monkey, comprising close to $3.7 million in stock, and Phil Stone's Fourthstone LLC was right behind this move, as the fund sold off about $2.1 million worth. These moves are interesting, as total hedge fund interest dropped by 3 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Independent Bank Group Inc (NASDAQ:IBTX) but similarly valued. These stocks are DiamondRock Hospitality Company (NYSE:DRH), Terex Corporation (NYSE:TEX), Intra-Cellular Therapies Inc (NASDAQ:ITCI), and Hope Bancorp, Inc. (NASDAQ:HOPE). All of these stocks' market caps resemble IBTX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DRH,16,38994,-1 TEX,21,147440,-1 ITCI,19,99236,7 HOPE,18,42707,-1 Average,18.5,82094,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $82 million. That figure was $74 million in IBTX's case. Terex Corporation (NYSE:TEX) is the most popular stock in this table. On the other hand DiamondRock Hospitality Company (NYSE:DRH) is the least popular one with only 16 bullish hedge fund positions. Independent Bank Group Inc (NASDAQ:IBTX) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th but still beat the market by 14.8 percentage points. Hedge funds were also right about betting on IBTX as the stock returned 68.2% in Q2 (through June 17th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.