World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Umpqua Holdings Corp (NASDAQ:UMPQ) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 20 hedge funds' portfolios at the end of March. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Graham Holdings Co (NYSE:GHC), Trex Company, Inc. (NYSE:TREX), and Dicks Sporting Goods Inc (NYSE:DKS) to gather more data points.
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.
We're going to check out the new hedge fund action encompassing Umpqua Holdings Corp (NASDAQ:UMPQ).
Hedge fund activity in Umpqua Holdings Corp (NASDAQ:UMPQ)
Heading into the second quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2018. On the other hand, there were a total of 15 hedge funds with a bullish position in UMPQ a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Fisher Asset Management held the most valuable stake in Umpqua Holdings Corp (NASDAQ:UMPQ), which was worth $56.5 million at the end of the first quarter. On the second spot was Two Sigma Advisors which amassed $24.8 million worth of shares. Moreover, Renaissance Technologies, D E Shaw, and Marshall Wace LLP were also bullish on Umpqua Holdings Corp (NASDAQ:UMPQ), allocating a large percentage of their portfolios to this stock.
Because Umpqua Holdings Corp (NASDAQ:UMPQ) has witnessed falling interest from hedge fund managers, it's safe to say that there was a specific group of money managers that slashed their full holdings heading into Q3. At the top of the heap, Matthew Lindenbaum's Basswood Capital dumped the largest stake of all the hedgies followed by Insider Monkey, comprising about $4.1 million in stock. David Costen Haley's fund, HBK Investments, also cut its stock, about $2.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Umpqua Holdings Corp (NASDAQ:UMPQ) but similarly valued. These stocks are Graham Holdings Co (NYSE:GHC), Trex Company, Inc. (NYSE:TREX), Dicks Sporting Goods Inc (NYSE:DKS), and Black Stone Minerals LP (NYSE:BSM). This group of stocks' market caps match UMPQ's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GHC,15,573233,-4 TREX,20,82364,6 DKS,20,303166,-2 BSM,5,9741,0 Average,15,242126,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $242 million. That figure was $219 million in UMPQ's case. Trex Company, Inc. (NYSE:TREX) is the most popular stock in this table. On the other hand Black Stone Minerals LP (NYSE:BSM) is the least popular one with only 5 bullish hedge fund positions. Umpqua Holdings Corp (NASDAQ:UMPQ) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on UMPQ, though not to the same extent, as the stock returned -0.7% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.