It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 18.7% so far in 2019 and outperformed the S&P 500 ETF by 6.6 percentage points. We are done processing the latest 13f filings and in this article we will study how hedge fund sentiment towards Live Oak Bancshares Inc (NASDAQ:LOB) changed during the first quarter.
Is Live Oak Bancshares Inc (NASDAQ:LOB) the right pick for your portfolio? Prominent investors are in a pessimistic mood. The number of bullish hedge fund bets shrunk by 1 in recent months. Our calculations also showed that LOB 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' 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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a peek at the new hedge fund action encompassing Live Oak Bancshares Inc (NASDAQ:LOB).
Hedge fund activity in Live Oak Bancshares Inc (NASDAQ:LOB)
At Q1's end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards LOB over the last 15 quarters. So, let's find out 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 Live Oak Bancshares Inc (NASDAQ:LOB), which was worth $17.7 million at the end of the first quarter. On the second spot was Select Equity Group which amassed $7.3 million worth of shares. Moreover, Two Sigma Advisors, Citadel Investment Group, and Millennium Management were also bullish on Live Oak Bancshares Inc (NASDAQ:LOB), allocating a large percentage of their portfolios to this stock.
Judging by the fact that Live Oak Bancshares Inc (NASDAQ:LOB) has experienced a decline in interest from the entirety of the hedge funds we track, it's safe to say that there lies a certain "tier" of hedge funds who sold off their full holdings in the third quarter. Intriguingly, Richard Driehaus's Driehaus Capital said goodbye to the biggest stake of the 700 funds followed by Insider Monkey, comprising about $1.9 million in stock, and Andrew Feldstein and Stephen Siderow's Blue Mountain Capital was right behind this move, as the fund cut about $0.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 1 funds in the third quarter.
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 Quotient Limited (NASDAQ:QTNT), SurModics, Inc. (NASDAQ:SRDX), FutureFuel Corp. (NYSE:FF), and Plug Power, Inc. (NASDAQ:PLUG). This group of stocks' market caps resemble LOB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QTNT,20,165663,1 SRDX,17,128689,0 FF,15,53636,1 PLUG,7,43583,1 Average,14.75,97893,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $98 million. That figure was $31 million in LOB's case. Quotient Limited (NASDAQ:QTNT) is the most popular stock in this table. On the other hand Plug Power, Inc. (NASDAQ:PLUG) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on LOB as the stock returned 17.7% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.