Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards County Bancorp, Inc. (NASDAQ:ICBK).
Hedge fund interest in County Bancorp, Inc. (NASDAQ:ICBK) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that ICBK isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Vericity, Inc. (NASDAQ:VERY), Charah Solutions, Inc. (NYSE:CHRA), and Mediwound Ltd (NASDAQ:MDWD) to gather more data points.
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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Jeffrey Gendell of Tontine Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $26 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we're going to review the latest hedge fund action encompassing County Bancorp, Inc. (NASDAQ:ICBK).
Do Hedge Funds Think ICBK Is A Good Stock To Buy Now?
At Q1's end, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2020. By comparison, 5 hedge funds held shares or bullish call options in ICBK a year ago. So, let's see 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 largest position in County Bancorp, Inc. (NASDAQ:ICBK), worth close to $4.1 million, amounting to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, holding a $1.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to County Bancorp, Inc. (NASDAQ:ICBK), around 0.03% of its 13F portfolio. Tontine Asset Management is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to ICBK.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as County Bancorp, Inc. (NASDAQ:ICBK) but similarly valued. We will take a look at Vericity, Inc. (NASDAQ:VERY), Charah Solutions, Inc. (NYSE:CHRA), Mediwound Ltd (NASDAQ:MDWD), Molecular Data Inc. (NASDAQ:MKD), California BanCorp (NASDAQ:CALB), Oconee Federal Financial Corp. (NASDAQ:OFED), and China Automotive Systems, Inc. (NASDAQ:CAAS). This group of stocks' market valuations match ICBK's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VERY,2,730,0 CHRA,4,27022,2 MDWD,4,7751,2 MKD,3,832,1 CALB,4,6061,1 OFED,1,299,-1 CAAS,1,2401,-4 Average,2.7,6442,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.7 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $6 million in ICBK's case. Charah Solutions, Inc. (NYSE:CHRA) is the most popular stock in this table. On the other hand Oconee Federal Financial Corp. (NASDAQ:OFED) is the least popular one with only 1 bullish hedge fund positions. County Bancorp, Inc. (NASDAQ:ICBK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ICBK is 51.2. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and beat the market again by 3.3 percentage points. Unfortunately ICBK wasn't nearly as popular as these 5 stocks and hedge funds that were betting on ICBK were disappointed as the stock returned 4.5% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.