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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the third quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of First Internet Bancorp (NASDAQ:INBK) based on that data.
Is INBK a good stock to buy now? First Internet Bancorp (NASDAQ:INBK) has seen an increase in activity from the world's largest hedge funds lately. First Internet Bancorp (NASDAQ:INBK) was in 9 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 8. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 8 hedge funds in our database with INBK positions at the end of the second quarter. Our calculations also showed that INBK isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 66 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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Phil Stone of Fourthstone LLC
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let's go over the key hedge fund action surrounding First Internet Bancorp (NASDAQ:INBK).
Do Hedge Funds Think INBK Is A Good Stock To Buy Now?
At Q3's end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards INBK over the last 21 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Voss Capital, managed by Travis Cocke, holds the number one position in First Internet Bancorp (NASDAQ:INBK). Voss Capital has a $1.1 million position in the stock, comprising 0.7% of its 13F portfolio. On Voss Capital's heels is Ancora Advisors, managed by Frederick DiSanto, which holds a $0.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions comprise Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Phil Stone's Fourthstone LLC and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Second Curve Capital allocated the biggest weight to First Internet Bancorp (NASDAQ:INBK), around 0.77% of its 13F portfolio. Voss Capital is also relatively very bullish on the stock, designating 0.65 percent of its 13F equity portfolio to INBK.
Now, some big names were breaking ground themselves. Fourthstone LLC, managed by Phil Stone, initiated the biggest position in First Internet Bancorp (NASDAQ:INBK). Fourthstone LLC had $0.4 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also made a $0.2 million investment in the stock during the quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as First Internet Bancorp (NASDAQ:INBK) but similarly valued. We will take a look at L.B. Foster Company (NASDAQ:FSTR), Inmune Bio Inc. (NASDAQ:INMB), Aytu BioScience, Inc. (NASDAQ:AYTU), Orrstown Financial Services, Inc. (NASDAQ:ORRF), Harrow Health, Inc. (NASDAQ:HROW), Richmond Mutual Bancorporation, Inc. (NASDAQ:RMBI), and Postal Realty Trust, Inc. (NYSE:PSTL). All of these stocks' market caps are closest to INBK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FSTR,12,34741,0 INMB,3,4021,3 AYTU,3,80,-1 ORRF,3,3712,-1 HROW,15,33472,5 RMBI,5,3727,0 PSTL,7,27122,1 Average,6.9,15268,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.9 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $4 million in INBK's case. Harrow Health, Inc. (NASDAQ:HROW) is the most popular stock in this table. On the other hand Inmune Bio Inc. (NASDAQ:INMB) is the least popular one with only 3 bullish hedge fund positions. First Internet Bancorp (NASDAQ:INBK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for INBK is 61. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on INBK as the stock returned 88.3% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.