Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don't make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and a 20% drop in stock prices. Things completely reversed in 2019 and stock indices hit record highs. Recent hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Horizon Bancorp (NASDAQ:HBNC) to find out whether it was one of their high conviction long-term ideas.
Horizon Bancorp (NASDAQ:HBNC) has seen a decrease in hedge fund sentiment of late. Our calculations also showed that HBNC 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/caption]
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. 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 also rely on the best performing hedge funds' buy/sell signals. We're going to view the latest hedge fund action regarding Horizon Bancorp (NASDAQ:HBNC).
What does smart money think about Horizon Bancorp (NASDAQ:HBNC)?
At Q3's end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from one quarter earlier. On the other hand, there were a total of 6 hedge funds with a bullish position in HBNC a year ago. With the smart money's sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Horizon Bancorp (NASDAQ:HBNC), with a stake worth $20.3 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $2.2 million. Winton Capital Management, Arrowstreet Capital, and D E Shaw 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 Minerva Advisors allocated the biggest weight to Horizon Bancorp (NASDAQ:HBNC), around 0.43% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to HBNC.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Marshall Wace. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified HBNC as a viable investment and initiated a position in the stock.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Horizon Bancorp (NASDAQ:HBNC) but similarly valued. These stocks are MBIA Inc. (NYSE:MBI), Pitney Bowes Inc. (NYSE:PBI), Northern Oil & Gas, Inc. (NYSE:NOG), and Lakeland Bancorp, Inc. (NASDAQ:LBAI). All of these stocks' market caps match HBNC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MBI,22,177777,4 PBI,19,73062,1 NOG,19,135625,0 LBAI,12,34546,1 Average,18,105253,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $105 million. That figure was $28 million in HBNC's case. MBIA Inc. (NYSE:MBI) is the most popular stock in this table. On the other hand Lakeland Bancorp, Inc. (NASDAQ:LBAI) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Horizon Bancorp (NASDAQ:HBNC) is even less popular than LBAI. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on HBNC, though not to the same extent, as the stock returned 9.2% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.