It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of 6 percentage points during the first 5 months of 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in First Financial Bankshares Inc (NASDAQ:FFIN).
First Financial Bankshares Inc (NASDAQ:FFIN) shareholders have witnessed an increase in support from the world’s most elite money managers recently. FFIN was in 13 hedge funds’ portfolios at the end of March. There were 6 hedge funds in our database with FFIN positions at the end of the previous quarter. Our calculations also showed that FFIN isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Paul Marshall of Marshall Wace
We’re going to analyze the key hedge fund action regarding First Financial Bankshares Inc (NASDAQ:FFIN).
Hedge fund activity in First Financial Bankshares Inc (NASDAQ:FFIN)
At Q1’s end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 117% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FFIN over the last 15 quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Balyasny Asset Management, managed by Dmitry Balyasny, holds the biggest position in First Financial Bankshares Inc (NASDAQ:FFIN). Balyasny Asset Management has a $14.7 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Israel Englander of Millennium Management, with a $5.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers that are bullish include Noam Gottesman’s GLG Partners, Paul Tudor Jones’s Tudor Investment Corp and Benjamin A. Smith’s Laurion Capital Management.
Now, key money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, assembled the most outsized position in First Financial Bankshares Inc (NASDAQ:FFIN). Millennium Management had $5.7 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also initiated a $2.8 million position during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, Benjamin A. Smith’s Laurion Capital Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s go over hedge fund activity in other stocks similar to First Financial Bankshares Inc (NASDAQ:FFIN). We will take a look at Verint Systems Inc. (NASDAQ:VRNT), Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), Avalara, Inc. (NYSE:AVLR), and Blackbaud, Inc. (NASDAQ:BLKB). All of these stocks’ market caps resemble FFIN’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VRNT,22,370064,4 CBRL,23,144940,4 AVLR,27,889800,13 BLKB,11,72252,-2 Average,20.75,369264,4.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $369 million. That figure was $33 million in FFIN’s case. Avalara, Inc. (NYSE:AVLR) is the most popular stock in this table. On the other hand Blackbaud, Inc. (NASDAQ:BLKB) is the least popular one with only 11 bullish hedge fund positions. First Financial Bankshares Inc (NASDAQ:FFIN) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on FFIN, though not to the same extent, as the stock returned 5.2% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
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