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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to the smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Cadence Bancorporation (NYSE:CADE)? The smart money sentiment can provide an answer to this question.
Cadence Bancorporation (NYSE:CADE) was in 24 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 29. CADE has seen a decrease in support from the world's most elite money managers lately. There were 25 hedge funds in our database with CADE holdings at the end of June. Our calculations also showed that CADE isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Donald Sussman of Paloma Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we're going to take a peek at the recent hedge fund action surrounding Cadence Bancorporation (NYSE:CADE).
Do Hedge Funds Think CADE Is A Good Stock To Buy Now?
At the end of September, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from one quarter earlier. By comparison, 22 hedge funds held shares or bullish call options in CADE a year ago. With hedge funds' sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, Forest Hill Capital held the most valuable stake in Cadence Bancorporation (NYSE:CADE), which was worth $18.8 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $16.3 million worth of shares. Prelude Capital (previously Springbok Capital), Alpine Associates, and Arrowstreet 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 Forest Hill Capital allocated the biggest weight to Cadence Bancorporation (NYSE:CADE), around 5.24% of its 13F portfolio. Global Frontier Investments is also relatively very bullish on the stock, setting aside 4.01 percent of its 13F equity portfolio to CADE.
Due to the fact that Cadence Bancorporation (NYSE:CADE) has experienced falling interest from the smart money, it's easy to see that there is a sect of money managers that decided to sell off their full holdings by the end of the third quarter. It's worth mentioning that Matthew Stadelman's Diamond Hill Capital cut the biggest position of the "upper crust" of funds watched by Insider Monkey, comprising about $42.5 million in stock. John Orrico's fund, Water Island Capital, also sold off its stock, about $7.7 million worth. These moves are interesting, as total hedge fund interest was cut by 1 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks similar to Cadence Bancorporation (NYSE:CADE). These stocks are Yelp Inc (NYSE:YELP), American Equity Investment Life Holding Company (NYSE:AEL), United Natural Foods, Inc. (NASDAQ:UNFI), Columbia Banking System Inc (NASDAQ:COLB), Avista Corp (NYSE:AVA), Cortexyme, Inc. (NASDAQ:CRTX), and Agios Pharmaceuticals Inc (NASDAQ:AGIO). This group of stocks' market caps resemble CADE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position YELP,26,534890,-1 AEL,20,170592,0 UNFI,19,92199,4 COLB,13,151306,1 AVA,14,42162,-3 CRTX,10,22939,1 AGIO,16,339047,-3 Average,16.9,193305,-0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.9 hedge funds with bullish positions and the average amount invested in these stocks was $193 million. That figure was $114 million in CADE's case. Yelp Inc (NYSE:YELP) is the most popular stock in this table. On the other hand Cortexyme, Inc. (NASDAQ:CRTX) is the least popular one with only 10 bullish hedge fund positions. Cadence Bancorporation (NYSE:CADE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CADE is 72.6. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately CADE wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CADE were disappointed as the stock returned 5.2% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.