Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors' money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Is German American Bancorp., Inc. (NASDAQ:GABC) a superb investment now? Hedge funds are taking a pessimistic view. The number of long hedge fund positions were trimmed by 1 recently. Our calculations also showed that GABC isn't among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We're going to analyze the new hedge fund action encompassing German American Bancorp., Inc. (NASDAQ:GABC).
How have hedgies been trading German American Bancorp., Inc. (NASDAQ:GABC)?
At the end of the fourth quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from one quarter earlier. On the other hand, there were a total of 2 hedge funds with a bullish position in GABC a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in German American Bancorp., Inc. (NASDAQ:GABC), which was worth $5.6 million at the end of the fourth quarter. On the second spot was Arrowstreet Capital which amassed $0.9 million worth of shares. Moreover, Two Sigma Advisors and Springbok Capital were also bullish on German American Bancorp., Inc. (NASDAQ:GABC), allocating a large percentage of their portfolios to this stock.
Judging by the fact that German American Bancorp., Inc. (NASDAQ:GABC) has experienced bearish sentiment from the aggregate hedge fund industry, it's easy to see that there was a specific group of hedge funds that slashed their positions entirely last quarter. Intriguingly, Paul Marshall and Ian Wace's Marshall Wace LLP sold off the biggest investment of all the hedgies watched by Insider Monkey, totaling close to $0.8 million in stock, and Israel Englander's Millennium Management was right behind this move, as the fund sold off about $0.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds last quarter.
Let's now take a look at hedge fund activity in other stocks similar to German American Bancorp., Inc. (NASDAQ:GABC). These stocks are INTL Fcstone Inc (NASDAQ:INTL), Victory Capital Holdings, Inc. (NASDAQ:VCTR), Hersha Hospitality Trust (NYSE:HT), and Sohu.com Limited (NASDAQ:SOHU). This group of stocks' market valuations match GABC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position INTL,13,73556,3 VCTR,10,42034,0 HT,13,36672,5 SOHU,10,93208,-1 Average,11.5,61368,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $7 million in GABC's case. INTL Fcstone Inc (NASDAQ:INTL) is the most popular stock in this table. On the other hand Victory Capital Holdings, Inc. (NASDAQ:VCTR) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks German American Bancorp., Inc. (NASDAQ:GABC) is even less popular than VCTR. Hedge funds dodged a bullet by taking a bearish stance towards GABC. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately GABC wasn't nearly as popular as these 15 stock (hedge fund sentiment was very bearish); GABC investors were disappointed as the stock returned 5.6% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.