Is SmartFinancial, Inc. (NASDAQ:SMBK) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
SmartFinancial, Inc. (NASDAQ:SMBK) shareholders have witnessed an increase in support from the world's most elite money managers lately. SMBK was in 7 hedge funds' portfolios at the end of September. There were 5 hedge funds in our database with SMBK holdings at the end of the previous quarter. Our calculations also showed that SMBK 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_27676" align="aligncenter" width="355"] Israel Englander of Millennium Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds' buy/sell signals. We're going to take a peek at the recent hedge fund action regarding SmartFinancial, Inc. (NASDAQ:SMBK).
How have hedgies been trading SmartFinancial, Inc. (NASDAQ:SMBK)?
At Q3's end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 40% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SMBK over the last 17 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Among these funds, Private Capital Management held the most valuable stake in SmartFinancial, Inc. (NASDAQ:SMBK), which was worth $10.3 million at the end of the third quarter. On the second spot was EJF Capital which amassed $8.5 million worth of shares. Forest Hill Capital, Renaissance Technologies, and Millennium Management 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 Private Capital Management allocated the biggest weight to SmartFinancial, Inc. (NASDAQ:SMBK), around 1.78% of its 13F portfolio. Forest Hill Capital is also relatively very bullish on the stock, earmarking 1.61 percent of its 13F equity portfolio to SMBK.
Now, key hedge funds have been driving this bullishness. Winton Capital Management, managed by David Harding, assembled the biggest position in SmartFinancial, Inc. (NASDAQ:SMBK). Winton Capital Management had $0.8 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also made a $0.2 million investment in the stock during the quarter.
Let's now review hedge fund activity in other stocks similar to SmartFinancial, Inc. (NASDAQ:SMBK). We will take a look at CapStar Financial Holdings, Inc. (NASDAQ:CSTR), Veritiv Corporation (NYSE:VRTV), Seneca Foods Corporation (NASDAQ:SENEA), and OptiNose, Inc. (NASDAQ:OPTN). This group of stocks' market valuations match SMBK's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CSTR,8,12324,4 VRTV,11,74905,2 SENEA,5,16044,2 OPTN,8,12280,2 Average,8,28888,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $30 million in SMBK's case. Veritiv Corporation (NYSE:VRTV) is the most popular stock in this table. On the other hand Seneca Foods Corporation (NASDAQ:SENEA) is the least popular one with only 5 bullish hedge fund positions. SmartFinancial, Inc. (NASDAQ:SMBK) 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 SMBK, though not to the same extent, as the stock returned 9.7% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.