Hedge Funds Were Buying Investors Bancorp, Inc. (ISBC) Before The Coronavirus
We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 Investors Bancorp, Inc. (NASDAQ:ISBC).
Is Investors Bancorp, Inc. (NASDAQ:ISBC) going to take off soon? Hedge funds are taking a bullish view. The number of bullish hedge fund bets advanced by 2 recently. Our calculations also showed that ISBC isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). ISBC was in 30 hedge funds' portfolios at the end of the fourth quarter of 2019. There were 28 hedge funds in our database with ISBC positions at the end of the previous quarter.
Today there are plenty of formulas investors have at their disposal to size up stocks. A pair of the best formulas are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the elite fund managers can beat the market by a significant amount (see the details here).
[caption id="attachment_26340" align="aligncenter" width="400"]
Ken Griffin of Citadel Investment Group[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Now let's go over the new hedge fund action surrounding Investors Bancorp, Inc. (NASDAQ:ISBC).
How have hedgies been trading Investors Bancorp, Inc. (NASDAQ:ISBC)?
At the end of the fourth quarter, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the previous quarter. By comparison, 27 hedge funds held shares or bullish call options in ISBC a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Ken Griffin's Citadel Investment Group has the biggest position in Investors Bancorp, Inc. (NASDAQ:ISBC), worth close to $97.9 million, amounting to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Millennium Management, led by Israel Englander, holding a $54.2 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors with similar optimism comprise Renaissance Technologies, D. E. Shaw's D E Shaw and Michael Price's MFP Investors. In terms of the portfolio weights assigned to each position MFP Investors allocated the biggest weight to Investors Bancorp, Inc. (NASDAQ:ISBC), around 2.15% of its 13F portfolio. AlphaOne Capital Partners is also relatively very bullish on the stock, setting aside 0.66 percent of its 13F equity portfolio to ISBC.
As aggregate interest increased, some big names have been driving this bullishness. Gillson Capital, managed by Daniel Johnson, assembled the biggest position in Investors Bancorp, Inc. (NASDAQ:ISBC). Gillson Capital had $7.2 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also initiated a $2.7 million position during the quarter. The other funds with new positions in the stock are Michael Kharitonov and Jon David McAuliffe's Voleon Capital, George Soros's Soros Fund Management, and Jinghua Yan's TwinBeech Capital.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Investors Bancorp, Inc. (NASDAQ:ISBC) but similarly valued. We will take a look at SkyWest, Inc. (NASDAQ:SKYW), Agios Pharmaceuticals Inc (NASDAQ:AGIO), Magnolia Oil & Gas Corporation (NASDAQ:MGY), and LiveRamp Holdings, Inc. (NYSE:RAMP). This group of stocks' market caps are similar to ISBC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SKYW,15,179258,-1 AGIO,23,309793,6 MGY,18,141829,0 RAMP,20,176338,1 Average,19,201805,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $202 million. That figure was $262 million in ISBC's case. Agios Pharmaceuticals Inc (NASDAQ:AGIO) is the most popular stock in this table. On the other hand SkyWest, Inc. (NASDAQ:SKYW) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Investors Bancorp, Inc. (NASDAQ:ISBC) is more popular among hedge funds. 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 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th and still beat the market by 5.5 percentage points. Unfortunately ISBC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ISBC were disappointed as the stock returned -34.8% during the first two and a half months of 2020 (through March 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
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