Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space.
Is Origin Bancorp, Inc. (NASDAQ:OBNK) the right pick for your portfolio? The smart money is becoming less confident. The number of bullish hedge fund positions were trimmed by 1 lately. Our calculations also showed that OBNK 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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's go over the new hedge fund action regarding Origin Bancorp, Inc. (NASDAQ:OBNK).
How have hedgies been trading Origin Bancorp, Inc. (NASDAQ:OBNK)?
At Q4's end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the second quarter of 2018. On the other hand, there were a total of 0 hedge funds with a bullish position in OBNK a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Ravi Chopra's Azora Capital has the number one position in Origin Bancorp, Inc. (NASDAQ:OBNK), worth close to $4.8 million, corresponding to 0.8% of its total 13F portfolio. On Azora Capital's heels is Forest Hill Capital, led by Mark Lee, holding a $4.6 million position; 1.5% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish include Anton Schutz's Mendon Capital Advisors, Peter Muller's PDT Partners and Israel Englander's Millennium Management.
Judging by the fact that Origin Bancorp, Inc. (NASDAQ:OBNK) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there were a few hedgies who were dropping their entire stakes heading into Q3. Interestingly, Dmitry Balyasny's Balyasny Asset Management sold off the biggest stake of the 700 funds monitored by Insider Monkey, totaling about $4.9 million in stock, and Paul Magidson, Jonathan Cohen. And Ostrom Enders's Castine Capital Management was right behind this move, as the fund said goodbye to about $3 million worth. These moves are important to note, as aggregate hedge fund interest fell by 1 funds heading into Q3.
Let's go over hedge fund activity in other stocks similar to Origin Bancorp, Inc. (NASDAQ:OBNK). These stocks are Mesa Laboratories, Inc. (NASDAQ:MLAB), Seabridge Gold, Inc. (NYSE:SA), Helix Energy Solutions Group Inc. (NYSE:HLX), and QuinStreet Inc (NASDAQ:QNST). This group of stocks' market caps match OBNK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MLAB,9,47877,-1 SA,8,43195,1 HLX,18,34360,2 QNST,27,233274,-1 Average,15.5,89677,0.25 [/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 $90 million. That figure was $14 million in OBNK's case. QuinStreet Inc (NASDAQ:QNST) is the most popular stock in this table. On the other hand Seabridge Gold, Inc. (NYSE:SA) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Origin Bancorp, Inc. (NASDAQ:OBNK) is even less popular than SA. Hedge funds dodged a bullet by taking a bearish stance towards OBNK. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately OBNK wasn't nearly as popular as these 15 stock (hedge fund sentiment was very bearish); OBNK investors were disappointed as the stock returned 0% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.