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At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Is The First Bancshares, Inc. (NASDAQ:FBMS) a splendid investment right now? Money managers are turning less bullish. The number of bullish hedge fund bets were cut by 1 lately. Our calculations also showed that FBMS isn't among the 30 most popular stocks among hedge funds (see the video below). FBMS was in 7 hedge funds' portfolios at the end of the second quarter of 2019. There were 8 hedge funds in our database with FBMS 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.
Why do we pay any attention at all to hedge fund sentiment? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a gander at the recent hedge fund action regarding The First Bancshares, Inc. (NASDAQ:FBMS).
Hedge fund activity in The First Bancshares, Inc. (NASDAQ:FBMS)
At the end of the second quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FBMS over the last 16 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Mendon Capital Advisors held the most valuable stake in The First Bancshares, Inc.(NASDAQ:FBMS), which was worth $16.6 million at the end of the second quarter. On the second spot was Castine Capital Management which amassed $8.4 million worth of shares. Moreover, Millennium Management, Renaissance Technologies, and Winton Capital Management were also bullish on The First Bancshares, Inc. (NASDAQ:FBMS), allocating a large percentage of their portfolios to this stock.
Because The First Bancshares, Inc. (NASDAQ:FBMS) has faced declining sentiment from the entirety of the hedge funds we track, it's easy to see that there was a specific group of fund managers who sold off their entire stakes by the end of the second quarter. It's worth mentioning that Mark Lee's Forest Hill Capital dumped the biggest stake of the 750 funds followed by Insider Monkey, totaling close to $2.8 million in stock, and Michael Gelband's ExodusPoint Capital was right behind this move, as the fund dumped about $0.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 funds by the end of the second quarter.
Let's go over hedge fund activity in other stocks similar to The First Bancshares, Inc. (NASDAQ:FBMS). We will take a look at AquaVenture Holdings Limited (NYSE:WAAS), Catchmark Timber Trust Inc (NYSE:CTT), FutureFuel Corp. (NYSE:FF), and Boston Omaha Corporation (NASDAQ:BOMN). This group of stocks' market caps resemble FBMS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WAAS,9,20008,-1 CTT,9,51055,0 FF,11,47387,-4 BOMN,5,242342,0 Average,8.5,90198,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $28 million in FBMS's case. FutureFuel Corp. (NYSE:FF) is the most popular stock in this table. On the other hand Boston Omaha Corporation (NASDAQ:BOMN) is the least popular one with only 5 bullish hedge fund positions. The First Bancshares, Inc. (NASDAQ:FBMS) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on FBMS as the stock returned 6.7% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
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