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Hedge Funds Are Piling Into Cadence Bancorporation (CADE)

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After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of March 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Cadence Bancorporation (NYSE:CADE).

Cadence Bancorporation (NYSE:CADE) has seen an increase in activity from the world's largest hedge funds in recent months. Cadence Bancorporation (NYSE:CADE) was in 27 hedge funds' portfolios at the end of March. The all time high for this statistic is 29. Our calculations also showed that CADE isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Matthew Halbower Pentwater Capital
Matthew Halbower Pentwater Capital

Matthew Halbower of Pentwater Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let's check out the recent hedge fund action regarding Cadence Bancorporation (NYSE:CADE).

Do Hedge Funds Think CADE Is A Good Stock To Buy Now?

At Q1's end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 42% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CADE over the last 23 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Diamond Hill Capital was the largest shareholder of Cadence Bancorporation (NYSE:CADE), with a stake worth $42.1 million reported as of the end of March. Trailing Diamond Hill Capital was Two Sigma Advisors, which amassed a stake valued at $25.8 million. Forest Hill Capital, Millennium Management, and Arrowstreet Capital 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 Forest Hill Capital allocated the biggest weight to Cadence Bancorporation (NYSE:CADE), around 5.32% of its 13F portfolio. Global Frontier Investments is also relatively very bullish on the stock, dishing out 3.54 percent of its 13F equity portfolio to CADE.

As industrywide interest jumped, key money managers have been driving this bullishness. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the most valuable position in Cadence Bancorporation (NYSE:CADE). Adage Capital Management had $9.8 million invested in the company at the end of the quarter. Matthew Halbower's Pentwater Capital Management also initiated a $6.7 million position during the quarter. The following funds were also among the new CADE investors: Travis Cocke's Voss Capital, Anton Schutz's Mendon Capital Advisors, and Paul Marshall and Ian Wace's Marshall Wace LLP.

Let's also examine hedge fund activity in other stocks similar to Cadence Bancorporation (NYSE:CADE). We will take a look at Winnebago Industries, Inc. (NYSE:WGO), Uniti Group Inc. (NASDAQ:UNIT), Nova Measuring Instruments Ltd. (NASDAQ:NVMI), Manchester United PLC (NYSE:MANU), Skyline Champion Corporation (NYSE:SKY), Vericel Corp (NASDAQ:VCEL), and RLJ Lodging Trust (NYSE:RLJ). This group of stocks' market caps are similar to CADE's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WGO,30,440894,3 UNIT,17,306823,0 NVMI,16,342917,0 MANU,16,47723,5 SKY,23,279371,0 VCEL,18,109350,-6 RLJ,14,70067,4 Average,19.1,228164,0.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.1 hedge funds with bullish positions and the average amount invested in these stocks was $228 million. That figure was $176 million in CADE's case. Winnebago Industries, Inc. (NYSE:WGO) is the most popular stock in this table. On the other hand RLJ Lodging Trust (NYSE:RLJ) is the least popular one with only 14 bullish hedge fund positions. Cadence Bancorporation (NYSE:CADE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CADE is 78.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately CADE wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CADE were disappointed as the stock returned -0.2% since the end of March (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.