Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Independent Bank Corporation (NASDAQ:IBCP) based on that data and determine whether they were really smart about the stock.
Independent Bank Corporation (NASDAQ:IBCP) investors should be aware of a decrease in support from the world's most elite money managers in recent months. Our calculations also showed that IBCP isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). 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 58 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.
[caption id="attachment_30621" align="aligncenter" width="399"] Cliff Asness of AQR Capital Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's take a glance at the key hedge fund action encompassing Independent Bank Corporation (NASDAQ:IBCP).
How have hedgies been trading Independent Bank Corporation (NASDAQ:IBCP)?
At the end of the first quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in IBCP over the last 18 quarters. 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 considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies has the number one position in Independent Bank Corporation (NASDAQ:IBCP), worth close to $13.3 million, comprising less than 0.1%% of its total 13F portfolio. On Renaissance Technologies's heels is AQR Capital Management, led by Cliff Asness, holding a $3.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers that hold long positions consist of John Overdeck and David Siegel's Two Sigma Advisors, D. E. Shaw's D E Shaw and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital. In terms of the portfolio weights assigned to each position Weld Capital Management allocated the biggest weight to Independent Bank Corporation (NASDAQ:IBCP), around 0.07% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, dishing out 0.03 percent of its 13F equity portfolio to IBCP.
Since Independent Bank Corporation (NASDAQ:IBCP) has experienced falling interest from hedge fund managers, logic holds that there exists a select few hedgies that elected to cut their entire stakes last quarter. At the top of the heap, Israel Englander's Millennium Management dropped the largest stake of the "upper crust" of funds monitored by Insider Monkey, totaling close to $7.1 million in stock, and Michael Gelband's ExodusPoint Capital was right behind this move, as the fund dumped about $0.3 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 1 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Independent Bank Corporation (NASDAQ:IBCP) but similarly valued. We will take a look at Urovant Sciences Ltd. (NASDAQ:UROV), Bridgewater Bancshares, Inc. (NASDAQ:BWB), Endurance International Group Holdings Inc (NASDAQ:EIGI), and Verrica Pharmaceuticals Inc. (NASDAQ:VRCA). This group of stocks' market values are similar to IBCP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UROV,7,48346,-6 BWB,8,18192,-2 EIGI,13,32611,-1 VRCA,3,53609,-1 Average,7.75,38190,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $27 million in IBCP's case. Endurance International Group Holdings Inc (NASDAQ:EIGI) is the most popular stock in this table. On the other hand Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) is the least popular one with only 3 bullish hedge fund positions. Independent Bank Corporation (NASDAQ:IBCP) is not the most popular stock in this group but hedge fund interest is still above average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately IBCP wasn't nearly as popular as these 10 stocks and hedge funds that were betting on IBCP were disappointed as the stock returned 16.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.