"Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn't by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today's darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn't attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal," said Vilas Fund in its Q1 investor letter. We aren't sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards SVB Financial Group (NASDAQ:SIVB).
Is SVB Financial Group (NASDAQ:SIVB) a healthy stock for your portfolio? Money managers are in an optimistic mood. The number of bullish hedge fund bets increased by 13 in recent months. Our calculations also showed that SIVB 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.
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 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_673876" align="aligncenter" width="1613"] John Overdeck of Two Sigma Advisors[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a glance at the new hedge fund action surrounding SVB Financial Group (NASDAQ:SIVB).
What have hedge funds been doing with SVB Financial Group (NASDAQ:SIVB)?
At the end of the third quarter, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from the second quarter of 2019. By comparison, 37 hedge funds held shares or bullish call options in SIVB a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in SVB Financial Group (NASDAQ:SIVB) was held by Fisher Asset Management, which reported holding $210.4 million worth of stock at the end of September. It was followed by Diamond Hill Capital with a $86.7 million position. Other investors bullish on the company included AQR Capital Management, Two Sigma Advisors, and Millennium Management. In terms of the portfolio weights assigned to each position Spindletop Capital allocated the biggest weight to SVB Financial Group (NASDAQ:SIVB), around 13.64% of its portfolio. Passport Capital is also relatively very bullish on the stock, setting aside 8.03 percent of its 13F equity portfolio to SIVB.
Now, key money managers were leading the bulls' herd. Portolan Capital Management, managed by George McCabe, initiated the most outsized position in SVB Financial Group (NASDAQ:SIVB). Portolan Capital Management had $11.3 million invested in the company at the end of the quarter. Peter Muller's PDT Partners also initiated a $9.4 million position during the quarter. The other funds with new positions in the stock are Jim Simons's Renaissance Technologies, John Burbank's Passport Capital, and David E. Shaw's D E Shaw.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as SVB Financial Group (NASDAQ:SIVB) but similarly valued. These stocks are Aramark (NYSE:ARMK), Camden Property Trust (NYSE:CPT), Noble Energy, Inc. (NYSE:NBL), and CF Industries Holdings, Inc. (NYSE:CF). This group of stocks' market values match SIVB's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ARMK,35,1297465,-1 CPT,20,316246,1 NBL,28,602859,3 CF,39,956283,4 Average,30.5,793213,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $793 million. That figure was $597 million in SIVB's case. CF Industries Holdings, Inc. (NYSE:CF) is the most popular stock in this table. On the other hand Camden Property Trust (NYSE:CPT) is the least popular one with only 20 bullish hedge fund positions. SVB Financial Group (NASDAQ:SIVB) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on SIVB as the stock returned 10.9% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.