Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 24.4% during the first 9 months of 2019 and outperformed the broader market benchmark by 4 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Triumph Bancorp Inc (NASDAQ:TBK) investors should pay attention to an increase in activity from the world's largest hedge funds of late. Our calculations also showed that TBK isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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' 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 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 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.
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Let's review the key hedge fund action encompassing Triumph Bancorp Inc (NASDAQ:TBK).
What have hedge funds been doing with Triumph Bancorp Inc (NASDAQ:TBK)?
At Q2's end, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 40% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TBK over the last 16 quarters. With hedge funds' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
The largest stake in Triumph Bancorp Inc (NASDAQ:TBK) was held by Mendon Capital Advisors, which reported holding $29.8 million worth of stock at the end of March. It was followed by Forest Hill Capital with a $8.5 million position. Other investors bullish on the company included Citadel Investment Group, Marshall Wace LLP, and Mountain Lake Investment Management.
Now, some big names have jumped into Triumph Bancorp Inc (NASDAQ:TBK) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most valuable position in Triumph Bancorp Inc (NASDAQ:TBK). Marshall Wace LLP had $1.6 million invested in the company at the end of the quarter. Mitch Cantor's Mountain Lake Investment Management also made a $1.3 million investment in the stock during the quarter. The following funds were also among the new TBK investors: Israel Englander's Millennium Management and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.
Let's now take a look at hedge fund activity in other stocks similar to Triumph Bancorp Inc (NASDAQ:TBK). We will take a look at Construction Partners, Inc. (NASDAQ:ROAD), Domo Inc. (NASDAQ:DOMO), Oaktree Specialty Lending Corporation (NASDAQ:OCSL), and Intra-Cellular Therapies Inc (NASDAQ:ITCI). This group of stocks' market values match TBK's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ROAD,6,14752,-2 DOMO,14,129781,-7 OCSL,17,80282,-2 ITCI,11,39450,-1 Average,12,66066,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $45 million in TBK's case. Oaktree Specialty Lending Corporation (NASDAQ:OCSL) is the most popular stock in this table. On the other hand Construction Partners, Inc. (NASDAQ:ROAD) is the least popular one with only 6 bullish hedge fund positions. Triumph Bancorp Inc (NASDAQ:TBK) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on TBK as the stock returned 9.8% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.