How do we determine whether FS Bancorp, Inc. (NASDAQ:FSBW) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
FS Bancorp, Inc. (NASDAQ:FSBW) has experienced an increase in enthusiasm from smart money in recent months. FSBW was in 10 hedge funds' portfolios at the end of the first quarter of 2019. There were 9 hedge funds in our database with FSBW positions at the end of the previous quarter. Our calculations also showed that FSBW 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.
We're going to take a look at the fresh hedge fund action encompassing FS Bancorp, Inc. (NASDAQ:FSBW).
How have hedgies been trading FS Bancorp, Inc. (NASDAQ:FSBW)?
Heading into the second quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in FSBW a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in FS Bancorp, Inc. (NASDAQ:FSBW) was held by EJF Capital, which reported holding $10.2 million worth of stock at the end of March. It was followed by AWH Capital with a $4.3 million position. Other investors bullish on the company included Renaissance Technologies, Two Sigma Advisors, and Millennium Management.
Now, key money managers were breaking ground themselves. Bailard Inc, managed by Thomas Bailard, established the largest position in FS Bancorp, Inc. (NASDAQ:FSBW). Bailard Inc had $0.3 million invested in the company at the end of the quarter. David Harding's Winton Capital Management also made a $0.3 million investment in the stock during the quarter.
Let's now take a look at hedge fund activity in other stocks similar to FS Bancorp, Inc. (NASDAQ:FSBW). These stocks are Chemung Financial Corp. (NASDAQ:CHMG), YRC Worldwide, Inc. (NASDAQ:YRCW), Stellus Capital Investment Corporation (NYSE:SCM), and China Distance Education Holdings Ltd (NYSE:DL). This group of stocks' market valuations match FSBW's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CHMG,5,16214,1 YRCW,12,16804,2 SCM,6,7136,2 DL,2,4250,0 Average,6.25,11101,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $20 million in FSBW's case. YRC Worldwide, Inc. (NASDAQ:YRCW) is the most popular stock in this table. On the other hand China Distance Education Holdings Ltd (NYSE:DL) is the least popular one with only 2 bullish hedge fund positions. FS Bancorp, Inc. (NASDAQ:FSBW) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately FSBW wasn't nearly as popular as these 20 stocks and hedge funds that were betting on FSBW were disappointed as the stock returned -2.1% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.