You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund managers like Jeff Ubben, George Soros and Seth Klarman hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Is Cadence Bancorporation (NYSE:CADE) worth your attention right now? The best stock pickers are betting on the stock. The number of bullish hedge fund bets went up by 4 in recent months. Our calculations also showed that cade isn't among the 30 most popular stocks among hedge funds.
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 encompassing Cadence Bancorporation (NYSE:CADE).
Hedge fund activity in Cadence Bancorporation (NYSE:CADE)
At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in CADE a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, Diamond Hill Capital was the largest shareholder of Cadence Bancorporation (NYSE:CADE), with a stake worth $59.9 million reported as of the end of March. Trailing Diamond Hill Capital was Two Sigma Advisors, which amassed a stake valued at $19.8 million. Azora Capital, Private Capital Management, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Now, some big names were leading the bulls' herd. Azora Capital, managed by Ravi Chopra, assembled the biggest position in Cadence Bancorporation (NYSE:CADE). Azora Capital had $10.9 million invested in the company at the end of the quarter. Gregg J. Powers's Private Capital Management also initiated a $10.4 million position during the quarter. The following funds were also among the new CADE investors: Paul Tudor Jones's Tudor Investment Corp, Thomas G. Maheras's Tegean Capital Management, and Gregg Moskowitz's Interval Partners.
Let's also examine hedge fund activity in other stocks similar to Cadence Bancorporation (NYSE:CADE). We will take a look at Vonage Holdings Corp. (NYSE:VG), ABM Industries, Inc. (NYSE:ABM), The Hain Celestial Group, Inc. (NASDAQ:HAIN), and Werner Enterprises, Inc. (NASDAQ:WERN). This group of stocks' market valuations resemble CADE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VG,34,259024,12 ABM,8,22434,-4 HAIN,13,492321,-8 WERN,16,126925,2 Average,17.75,225176,0.5 [/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 $225 million. That figure was $145 million in CADE's case. Vonage Holdings Corp. (NYSE:VG) is the most popular stock in this table. On the other hand ABM Industries, Inc. (NYSE:ABM) is the least popular one with only 8 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 calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on CADE as the stock returned 5.1% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.