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 second 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 5 years and analyze what the smart money thinks of Prosperity Bancshares, Inc. (NYSE:PB) based on that data and determine whether they were really smart about the stock.
Prosperity Bancshares, Inc. (NYSE:PB) has seen an increase in activity from the world’s largest hedge funds recently. Prosperity Bancshares, Inc. (NYSE:PB) was in 27 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 22. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PB isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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. 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 website to get excerpts of these letters in your inbox. With all of this in mind let’s take a look at the recent hedge fund action regarding Prosperity Bancshares, Inc. (NYSE:PB).
How have hedgies been trading Prosperity Bancshares, Inc. (NYSE:PB)?
At Q2’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 69% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in PB over the last 20 quarters. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Among these funds, Citadel Investment Group held the most valuable stake in Prosperity Bancshares, Inc. (NYSE:PB), which was worth $34.2 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $18.4 million worth of shares. Millennium Management, Balyasny Asset Management, and GLG Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Elizabeth Park Capital Management allocated the biggest weight to Prosperity Bancshares, Inc. (NYSE:PB), around 3.14% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, earmarking 0.53 percent of its 13F equity portfolio to PB.
As one would reasonably expect, specific money managers have jumped into Prosperity Bancshares, Inc. (NYSE:PB) headfirst. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, established the biggest position in Prosperity Bancshares, Inc. (NYSE:PB). Polar Capital had $1.7 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also made a $1.7 million investment in the stock during the quarter. The other funds with brand new PB positions are Donald Sussman’s Paloma Partners, Jinghua Yan’s TwinBeech Capital, and D. E. Shaw’s D E Shaw.
Let’s check out hedge fund activity in other stocks similar to Prosperity Bancshares, Inc. (NYSE:PB). We will take a look at Legend Biotech Corporation (NASDAQ:LEGN), Deckers Outdoor Corp (NYSE:DECK), Steel Dynamics, Inc. (NASDAQ:STLD), CACI International Inc (NYSE:CACI), Pearson PLC (NYSE:PSO), Arrow Electronics, Inc. (NYSE:ARW), and Quanta Services Inc (NYSE:PWR). This group of stocks’ market values match PB’s market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LEGN,28,551006,28 DECK,47,857767,16 STLD,30,370392,3 CACI,34,395916,9 PSO,7,14870,-1 ARW,29,531930,6 PWR,31,624315,3 Average,29.4,478028,9.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.4 hedge funds with bullish positions and the average amount invested in these stocks was $478 million. That figure was $109 million in PB’s case. Deckers Outdoor Corp (NYSE:DECK) is the most popular stock in this table. On the other hand Pearson PLC (NYSE:PSO) is the least popular one with only 7 bullish hedge fund positions. Prosperity Bancshares, Inc. (NYSE:PB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PB is 65. 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 negative signal and 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 21.3% in 2020 through September 25th and surpassed the market by 17.7 percentage points. Unfortunately PB wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PB investors were disappointed as the stock returned -15.6% since Q2 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.