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After several tireless days we have finished crunching the numbers from nearly 750 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 September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Live Oak Bancshares Inc (NASDAQ:LOB).
Is Live Oak Bancshares Inc (NASDAQ:LOB) a healthy stock for your portfolio? The best stock pickers are becoming more confident. The number of long hedge fund bets increased by 4 lately. Our calculations also showed that LOB 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' 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 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 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.
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Israel Englander of Millennium Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds' buy/sell signals. We're going to take a look at the recent hedge fund action encompassing Live Oak Bancshares Inc (NASDAQ:LOB).
Hedge fund activity in Live Oak Bancshares Inc (NASDAQ:LOB)
Heading into the fourth quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 67% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in LOB a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Live Oak Bancshares Inc (NASDAQ:LOB) was held by Mendon Capital Advisors, which reported holding $23.8 million worth of stock at the end of September. It was followed by Millennium Management with a $3.6 million position. Other investors bullish on the company included Citadel Investment Group, Select Equity Group, and D E Shaw. In terms of the portfolio weights assigned to each position Mendon Capital Advisors allocated the biggest weight to Live Oak Bancshares Inc (NASDAQ:LOB), around 4.02% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to LOB.
Now, some big names were leading the bulls' herd. D E Shaw, managed by David E. Shaw, initiated the most valuable position in Live Oak Bancshares Inc (NASDAQ:LOB). D E Shaw had $1.9 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also initiated a $0.5 million position during the quarter. The other funds with brand new LOB positions are Renaissance Technologies and Matthew Hulsizer's PEAK6 Capital Management.
Let's now take a look at hedge fund activity in other stocks similar to Live Oak Bancshares Inc (NASDAQ:LOB). We will take a look at Glu Mobile Inc. (NASDAQ:GLUU), Arvinas, Inc. (NASDAQ:ARVN), CBTX, Inc. (NASDAQ:CBTX), and Corporacion America Airports SA (NYSE:CAAP). This group of stocks' market caps are similar to LOB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GLUU,22,87877,-1 ARVN,11,140075,-2 CBTX,7,9568,0 CAAP,11,27126,0 Average,12.75,66162,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $37 million in LOB's case. Glu Mobile Inc. (NASDAQ:GLUU) is the most popular stock in this table. On the other hand CBTX, Inc. (NASDAQ:CBTX) is the least popular one with only 7 bullish hedge fund positions. Live Oak Bancshares Inc (NASDAQ:LOB) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately LOB wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); LOB investors were disappointed as the stock returned 0.8% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.