Insider Monkey has processed numerous 13F filings of hedge funds and famous investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds and investors' positions as of the end of the third quarter. You can find write-ups about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves and analyze what the smart money thinks of Cullen/Frost Bankers, Inc. (NYSE:CFR) based on that data.
Cullen/Frost Bankers, Inc. (NYSE:CFR) shareholders have witnessed a decrease in enthusiasm from smart money in recent months. CFR was in 18 hedge funds' portfolios at the end of September. There were 21 hedge funds in our database with CFR positions at the end of the previous quarter. Our calculations also showed that CFR isn't among the 30 most popular stocks among hedge funds.
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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We're going to take a look at the recent hedge fund action encompassing Cullen/Frost Bankers, Inc. (NYSE:CFR).
Hedge fund activity in Cullen/Frost Bankers, Inc. (NYSE:CFR)
At Q3's end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in CFR heading into this year. With the smart money's sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, Park Presidio Capital held the most valuable stake in Cullen/Frost Bankers, Inc. (NYSE:CFR), which was worth $52.2 million at the end of the third quarter. On the second spot was Marshall Wace LLP which amassed $32.3 million worth of shares. Moreover, Arrowstreet Capital, Two Sigma Advisors, and Carlson Capital were also bullish on Cullen/Frost Bankers, Inc. (NYSE:CFR), allocating a large percentage of their portfolios to this stock.
Due to the fact that Cullen/Frost Bankers, Inc. (NYSE:CFR) has witnessed declining sentiment from hedge fund managers, logic holds that there were a few fund managers who were dropping their positions entirely last quarter. Interestingly, Israel Englander's Millennium Management dropped the largest stake of the "upper crust" of funds monitored by Insider Monkey, worth close to $21.1 million in stock, and Ken Griffin's Citadel Investment Group was right behind this move, as the fund dumped about $10.9 million worth. These moves are interesting, as total hedge fund interest fell by 3 funds last quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Cullen/Frost Bankers, Inc. (NYSE:CFR) but similarly valued. We will take a look at Erie Indemnity Company (NASDAQ:ERIE), Fair Isaac Corporation (NYSE:FICO), Watsco Inc (NYSE:WSO), and Randgold Resources Ltd. (NASDAQ:GOLD). This group of stocks' market caps are similar to CFR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ERIE,14,73849,4 FICO,21,344358,-1 WSO,17,163129,4 GOLD,18,274444,7 Average,17.5,213945,3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $214 million. That figure was $170 million in CFR's case. Fair Isaac Corporation (NYSE:FICO) is the most popular stock in this table. On the other hand Erie Indemnity Company (NASDAQ:ERIE) is the least popular one with only 14 bullish hedge fund positions. Cullen/Frost Bankers, Inc. (NYSE:CFR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. In this regard FICO might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.