Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors' consensus picks have done well on average over the long-term. The top 15 S&P 500 stocks among hedge funds at the end of September 2018 returned an average of 1% through March 15th whereas the S&P 500 Index ETF lost 2.2% during the same period. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Horizon Bancorp, Inc. (NASDAQ:HBNC) from the perspective of those elite funds.
Hedge fund interest in Horizon Bancorp, Inc. (NASDAQ:HBNC) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare HBNC to other stocks including Flushing Financial Corporation (NASDAQ:FFIC), Lantheus Holdings Inc (NASDAQ:LNTH), and Scholar Rock Holding Corporation (NASDAQ:SRRK) to get a better sense of its popularity.
According to most stock holders, hedge funds are seen as slow, old investment vehicles of years past. While there are greater than 8000 funds trading at the moment, We hone in on the upper echelon of this group, approximately 750 funds. These investment experts oversee the majority of the hedge fund industry's total capital, and by tailing their first-class stock picks, Insider Monkey has deciphered a number of investment strategies that have historically surpassed the broader indices. Insider Monkey's flagship hedge fund strategy outperformed the S&P 500 index by nearly 5 percentage points annually since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
Let's check out the new hedge fund action regarding Horizon Bancorp, Inc. (NASDAQ:HBNC).
What have hedge funds been doing with Horizon Bancorp, Inc. (NASDAQ:HBNC)?
At Q4's end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 5 hedge funds held shares or bullish call options in HBNC 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.
Among these funds, Renaissance Technologies held the most valuable stake in Horizon Bancorp, Inc. (NASDAQ:HBNC), which was worth $14.8 million at the end of the fourth quarter. On the second spot was Millennium Management which amassed $0.8 million worth of shares. Moreover, D E Shaw, Two Sigma Advisors, and AQR Capital Management were also bullish on Horizon Bancorp, Inc. (NASDAQ:HBNC), allocating a large percentage of their portfolios to this stock.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. 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 only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Zebra Capital Management).
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Horizon Bancorp, Inc. (NASDAQ:HBNC) but similarly valued. We will take a look at Flushing Financial Corporation (NASDAQ:FFIC), Lantheus Holdings Inc (NASDAQ:LNTH), Scholar Rock Holding Corporation (NASDAQ:SRRK), and Eagle Pharmaceuticals Inc (NASDAQ:EGRX). This group of stocks' market valuations are closest to HBNC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FFIC,7,40961,-1 LNTH,17,65005,1 SRRK,4,80044,0 EGRX,21,143787,2 Average,12.25,82449,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $82 million. That figure was $17 million in HBNC's case. Eagle Pharmaceuticals Inc (NASDAQ:EGRX) is the most popular stock in this table. On the other hand Scholar Rock Holding Corporation (NASDAQ:SRRK) is the least popular one with only 4 bullish hedge fund positions. Horizon Bancorp, Inc. (NASDAQ:HBNC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately HBNC wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); HBNC investors were disappointed as the stock returned 1.4% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.