Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards First Interstate Bancsystem Inc (NASDAQ:FIBK).
First Interstate Bancsystem Inc (NASDAQ:FIBK) has seen an increase in hedge fund interest of late. Our calculations also showed that FIBK isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_673876" align="aligncenter" width="400"] John Overdeck of Two Sigma Advisors[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. With all of this in mind let's take a peek at the new hedge fund action encompassing First Interstate Bancsystem Inc (NASDAQ:FIBK).
What does smart money think about First Interstate Bancsystem Inc (NASDAQ:FIBK)?
At the end of the fourth quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FIBK over the last 18 quarters. With the smart money's capital changing hands, there exists an "upper tier" of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of First Interstate Bancsystem Inc (NASDAQ:FIBK), with a stake worth $27.4 million reported as of the end of September. Trailing Citadel Investment Group was Renaissance Technologies, which amassed a stake valued at $13.1 million. Balyasny Asset Management, AQR Capital Management, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Sciencast Management allocated the biggest weight to First Interstate Bancsystem Inc (NASDAQ:FIBK), around 0.08% of its 13F portfolio. Balyasny Asset Management is also relatively very bullish on the stock, designating 0.06 percent of its 13F equity portfolio to FIBK.
As aggregate interest increased, some big names have jumped into First Interstate Bancsystem Inc (NASDAQ:FIBK) headfirst. ExodusPoint Capital, managed by Michael Gelband, initiated the most valuable position in First Interstate Bancsystem Inc (NASDAQ:FIBK). ExodusPoint Capital had $0.7 million invested in the company at the end of the quarter. Donald Sussman's Paloma Partners also made a $0.6 million investment in the stock during the quarter. The other funds with brand new FIBK positions are Schonfeld Strategic Advisors and Qing Li's Sciencast Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as First Interstate Bancsystem Inc (NASDAQ:FIBK) but similarly valued. These stocks are Advanced Energy Industries, Inc. (NASDAQ:AEIS), Wolverine World Wide, Inc. (NYSE:WWW), TreeHouse Foods Inc. (NYSE:THS), and American Equity Investment Life Holding (NYSE:AEL). This group of stocks' market valuations are closest to FIBK's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AEIS,20,149266,3 WWW,23,119537,2 THS,27,237953,8 AEL,17,89434,-2 Average,21.75,149048,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $149 million. That figure was $59 million in FIBK's case. TreeHouse Foods Inc. (NYSE:THS) is the most popular stock in this table. On the other hand American Equity Investment Life Holding (NYSE:AEL) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks First Interstate Bancsystem Inc (NASDAQ:FIBK) is even less popular than AEL. Hedge funds dodged a bullet by taking a bearish stance towards FIBK. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but managed to beat the market by 5.5 percentage points. Unfortunately FIBK wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); FIBK investors were disappointed as the stock returned -35.2% during the same time period 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 most of these stocks already outperformed the market so far in Q1. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.