Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of International Bancshares Corp (NASDAQ:IBOC).
International Bancshares Corp (NASDAQ:IBOC) investors should pay attention to a decrease in activity from the world's largest hedge funds in recent months. IBOC was in 16 hedge funds' portfolios at the end of September. There were 18 hedge funds in our database with IBOC positions at the end of the previous quarter. Our calculations also showed that IBOC 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.
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 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. 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.
[caption id="attachment_670485" align="aligncenter" width="1613"] Michael Platt of BlueCrest Capital[/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 analyze the recent hedge fund action encompassing International Bancshares Corp (NASDAQ:IBOC).
How are hedge funds trading International Bancshares Corp (NASDAQ:IBOC)?
Heading into the fourth quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in IBOC a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Among these funds, Millennium Management held the most valuable stake in International Bancshares Corp (NASDAQ:IBOC), which was worth $52.1 million at the end of the third quarter. On the second spot was Polaris Capital Management which amassed $47.7 million worth of shares. Arrowstreet Capital, AQR Capital Management, and D E Shaw 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 Polaris Capital Management allocated the biggest weight to International Bancshares Corp (NASDAQ:IBOC), around 2.14% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, dishing out 1.5 percent of its 13F equity portfolio to IBOC.
Seeing as International Bancshares Corp (NASDAQ:IBOC) has experienced falling interest from the entirety of the hedge funds we track, we can see that there is a sect of hedge funds that elected to cut their positions entirely last quarter. It's worth mentioning that Benjamin A. Smith's Laurion Capital Management dropped the largest stake of the 750 funds tracked by Insider Monkey, valued at about $0.5 million in stock, and Thomas Bailard's Bailard Inc was right behind this move, as the fund dropped about $0.4 million worth. These transactions are important to note, as total hedge fund interest fell by 2 funds last quarter.
Let's now take a look at hedge fund activity in other stocks similar to International Bancshares Corp (NASDAQ:IBOC). These stocks are Rogers Corporation (NYSE:ROG), Inovalon Holdings Inc (NASDAQ:INOV), The Ensign Group, Inc. (NASDAQ:ENSG), and Genomic Health, Inc. (NASDAQ:GHDX). This group of stocks' market valuations are closest to IBOC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ROG,19,73962,0 INOV,11,21045,4 ENSG,16,118684,2 GHDX,16,946976,-2 Average,15.5,290167,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $290 million. That figure was $162 million in IBOC's case. Rogers Corporation (NYSE:ROG) is the most popular stock in this table. On the other hand Inovalon Holdings Inc (NASDAQ:INOV) is the least popular one with only 11 bullish hedge fund positions. International Bancshares Corp (NASDAQ:IBOC) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on IBOC, though not to the same extent, as the stock returned 9.8% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.