It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren't usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index's returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you'd fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 8 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That's why we are going to go over recent hedge fund activity in First Internet Bancorp (NASDAQ:INBK).
Is First Internet Bancorp (NASDAQ:INBK) the right investment to pursue these days? Prominent investors are getting more bullish. The number of long hedge fund bets went up by 3 lately. Our calculations also showed that INBK isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). INBK was in 6 hedge funds' portfolios at the end of September. There were 3 hedge funds in our database with INBK positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are numerous methods market participants use to grade stocks. A duo of the most underrated methods are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the best investment managers can trounce the S&P 500 by a very impressive amount (see the details here).
[caption id="attachment_189632" align="alignnone" width="600"] David Harding of Winton Capital Management[/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 as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind we're going to take a glance at the key hedge fund action surrounding First Internet Bancorp (NASDAQ:INBK).
What have hedge funds been doing with First Internet Bancorp (NASDAQ:INBK)?
Heading into the fourth quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 100% from the second quarter of 2019. On the other hand, there were a total of 5 hedge funds with a bullish position in INBK a year ago. With hedge funds' capital changing hands, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among these funds, Ancora Advisors held the most valuable stake in First Internet Bancorp (NASDAQ:INBK), which was worth $1.1 million at the end of the third quarter. On the second spot was Winton Capital Management which amassed $1 million worth of shares. Renaissance Technologies, D E Shaw, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Ancora Advisors allocated the biggest weight to First Internet Bancorp (NASDAQ:INBK), around 0.05% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to INBK.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Winton Capital Management, managed by David Harding, initiated the most valuable position in First Internet Bancorp (NASDAQ:INBK). Winton Capital Management had $1 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $0.5 million position during the quarter. The only other fund with a brand new INBK position is David E. Shaw's D E Shaw.
Let's now review hedge fund activity in other stocks similar to First Internet Bancorp (NASDAQ:INBK). These stocks are Sussex Bancorp (NASDAQ:SBBX), Mesa Air Group, Inc. (NASDAQ:MESA), LAIX Inc. (NYSE:LAIX), and BCB Bancorp, Inc. (NJ) (NASDAQ:BCBP). This group of stocks' market values resemble INBK's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SBBX,7,19998,1 MESA,16,35989,-3 LAIX,3,3892,1 BCBP,3,6850,1 Average,7.25,16682,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $3 million in INBK's case. Mesa Air Group, Inc. (NASDAQ:MESA) is the most popular stock in this table. On the other hand LAIX Inc. (NYSE:LAIX) is the least popular one with only 3 bullish hedge fund positions. First Internet Bancorp (NASDAQ:INBK) is not the least popular stock in this group but hedge fund interest is still below 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. A small number of hedge funds were also right about betting on INBK, though not to the same extent, as the stock returned 6% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.