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We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Equity Bancshares, Inc. (NASDAQ:EQBK).
Equity Bancshares, Inc. (NASDAQ:EQBK) has seen an increase in hedge fund sentiment recently. Our calculations also showed that EQBK 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.
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Jim Simons of Renaissance Technologies[/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 let's check out the latest hedge fund action encompassing Equity Bancshares, Inc. (NASDAQ:EQBK).
What does smart money think about Equity Bancshares, Inc. (NASDAQ:EQBK)?
At Q3's end, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from one quarter earlier. By comparison, 7 hedge funds held shares or bullish call options in EQBK a year ago. With the smart money's capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
More specifically, Mendon Capital Advisors was the largest shareholder of Equity Bancshares, Inc. (NASDAQ:EQBK), with a stake worth $25.6 million reported as of the end of September. Trailing Mendon Capital Advisors was Renaissance Technologies, which amassed a stake valued at $7 million. Forest Hill Capital, Millennium Management, and ExodusPoint 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 Mendon Capital Advisors allocated the biggest weight to Equity Bancshares, Inc. (NASDAQ:EQBK), around 4.31% of its 13F portfolio. Forest Hill Capital is also relatively very bullish on the stock, setting aside 2.39 percent of its 13F equity portfolio to EQBK.
As aggregate interest increased, key money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, created the biggest position in Equity Bancshares, Inc. (NASDAQ:EQBK). Millennium Management had $2 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also initiated a $0.3 million position during the quarter. The only other fund with a brand new EQBK position is Ken Griffin's Citadel Investment Group.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Equity Bancshares, Inc. (NASDAQ:EQBK) but similarly valued. These stocks are Merus N.V. (NASDAQ:MRUS), Arcus Biosciences, Inc. (NYSE:RCUS), SIGA Technologies Inc. (NASDAQ:SIGA), and Cutera, Inc. (NASDAQ:CUTR). This group of stocks' market valuations match EQBK's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MRUS,8,139433,1 RCUS,11,52740,-3 SIGA,12,27474,2 CUTR,13,97437,3 Average,11,79271,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $42 million in EQBK's case. Cutera, Inc. (NASDAQ:CUTR) is the most popular stock in this table. On the other hand Merus N.V. (NASDAQ:MRUS) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Equity Bancshares, Inc. (NASDAQ:EQBK) is even less popular than MRUS. 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 EQBK, though not to the same extent, as the stock returned 9.8% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.