As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the third quarter. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Independent Bank Corp (NASDAQ:INDB).
Independent Bank Corp (NASDAQ:INDB) has seen an increase in activity from the world's largest hedge funds recently. INDB was in 12 hedge funds' portfolios at the end of September. There were 11 hedge funds in our database with INDB positions at the end of the previous quarter. Our calculations also showed that INDB 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.
Why do we pay any attention at all to hedge fund sentiment? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_221556" align="aligncenter" width="450"] Richard Driehaus of Driehaus Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let's check out the fresh hedge fund action encompassing Independent Bank Corp (NASDAQ:INDB).
How are hedge funds trading Independent Bank Corp (NASDAQ:INDB)?
Heading into the fourth quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the second quarter of 2019. On the other hand, there were a total of 7 hedge funds with a bullish position in INDB a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Independent Bank Corp (NASDAQ:INDB) was held by Fisher Asset Management, which reported holding $7.8 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $5.9 million position. Other investors bullish on the company included Millennium Management, Holocene Advisors, and Driehaus Capital. In terms of the portfolio weights assigned to each position GRT Capital Partners allocated the biggest weight to Independent Bank Corp (NASDAQ:INDB), around 0.49% of its 13F portfolio. Polaris Capital Management is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to INDB.
As one would reasonably expect, key money managers were breaking ground themselves. Holocene Advisors, managed by Brandon Haley, initiated the most outsized position in Independent Bank Corp (NASDAQ:INDB). Holocene Advisors had $1.1 million invested in the company at the end of the quarter. Donald Sussman's Paloma Partners also made a $0.4 million investment in the stock during the quarter. The only other fund with a brand new INDB position is Benjamin A. Smith's Laurion Capital Management.
Let's check out hedge fund activity in other stocks similar to Independent Bank Corp (NASDAQ:INDB). These stocks are AVX Corporation (NYSE:AVX), South State Corporation (NASDAQ:SSB), Wingstop Inc (NASDAQ:WING), and Spectrum Brands Holdings, Inc. (NYSE:SPB). This group of stocks' market caps resemble INDB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AVX,13,68575,2 SSB,17,30763,3 WING,23,301040,-1 SPB,34,784958,10 Average,21.75,296334,3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $296 million. That figure was $20 million in INDB's case. Spectrum Brands Holdings, Inc. (NYSE:SPB) is the most popular stock in this table. On the other hand AVX Corporation (NYSE:AVX) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Independent Bank Corp (NASDAQ:INDB) is even less popular than AVX. Hedge funds clearly dropped the ball on INDB as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 INDB as the stock returned 12.8% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.