While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Allegiance Bancshares, Inc. (NASDAQ:ABTX).
Is Allegiance Bancshares, Inc. (NASDAQ:ABTX) a great investment right now? Prominent investors were cutting their exposure. The number of bullish hedge fund bets dropped by 1 lately. Allegiance Bancshares, Inc. (NASDAQ:ABTX) was in 4 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 9. Our calculations also showed that ABTX 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). There were 5 hedge funds in our database with ABTX positions at the end of the second quarter. Video: 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 S&P 500 ETFs by 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.
Israel Englander of Millennium Management
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 10 most profitable companies in the world 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. Now we're going to check out the new hedge fund action surrounding Allegiance Bancshares, Inc. (NASDAQ:ABTX).
How are hedge funds trading Allegiance Bancshares, Inc. (NASDAQ:ABTX)?
At the end of September, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in ABTX over the last 21 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Chuck Royce's Royce & Associates has the number one position in Allegiance Bancshares, Inc. (NASDAQ:ABTX), worth close to $2.9 million, comprising less than 0.1%% of its total 13F portfolio. On Royce & Associates's heels is Winton Capital Management, led by David Harding, holding a $0.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism encompass Minhua Zhang's Weld Capital Management, Peter Muller's PDT Partners and . In terms of the portfolio weights assigned to each position Weld Capital Management allocated the biggest weight to Allegiance Bancshares, Inc. (NASDAQ:ABTX), around 0.15% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.03 percent of its 13F equity portfolio to ABTX.
Due to the fact that Allegiance Bancshares, Inc. (NASDAQ:ABTX) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there exists a select few hedgies that elected to cut their full holdings in the third quarter. Interestingly, Emanuel J. Friedman's EJF Capital sold off the largest investment of the "upper crust" of funds monitored by Insider Monkey, totaling close to $0.7 million in stock, and Israel Englander's Millennium Management was right behind this move, as the fund said goodbye to about $0.4 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 1 funds in the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Allegiance Bancshares, Inc. (NASDAQ:ABTX) but similarly valued. These stocks are AVROBIO, Inc. (NASDAQ:AVRO), Golden Star Resources Ltd. (NYSE:GSS), Myers Industries, Inc. (NYSE:MYE), Shoe Carnival, Inc. (NASDAQ:SCVL), Dynavax Technologies Corporation (NASDAQ:DVAX), HarborOne Bancorp, Inc. (NASDAQ:HONE), and Talos Energy, Inc. (NYSE:TALO). This group of stocks' market caps are similar to ABTX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AVRO,17,121702,0 GSS,6,23434,-2 MYE,12,80684,1 SCVL,19,49764,8 DVAX,23,58102,6 HONE,14,26950,1 TALO,8,18051,-6 Average,14.1,54098,1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.1 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $4 million in ABTX's case. Dynavax Technologies Corporation (NASDAQ:DVAX) is the most popular stock in this table. On the other hand Golden Star Resources Ltd. (NYSE:GSS) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Allegiance Bancshares, Inc. (NASDAQ:ABTX) is even less popular than GSS. Our overall hedge fund sentiment score for ABTX is 17.3. 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. Hedge funds clearly dropped the ball on ABTX as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on ABTX as the stock returned 39.1% since Q3 (through November 27th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.