Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Origin Bancorp, Inc. (NASDAQ:OBNK)? The smart money sentiment can provide an answer to this question.
Hedge fund interest in Origin Bancorp, Inc. (NASDAQ:OBNK) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that OBNK isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). 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 TCG BDC, Inc. (NASDAQ:CGBD), Neoleukin Therapeutics, Inc. (NASDAQ:NLTX), and Fusion Pharmaceuticals Inc. (NASDAQ:FUSN) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Anton Schutz of Mendon Capital Advisors
With all of this in mind we're going to view the new hedge fund action encompassing Origin Bancorp, Inc. (NASDAQ:OBNK).
What have hedge funds been doing with Origin Bancorp, Inc. (NASDAQ:OBNK)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2020. By comparison, 6 hedge funds held shares or bullish call options in OBNK a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Is OBNK A Good Stock To Buy?
Among these funds, Mendon Capital Advisors held the most valuable stake in Origin Bancorp, Inc. (NASDAQ:OBNK), which was worth $6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $1.2 million worth of shares. Winton Capital Management, Citadel Investment Group, and Arrowstreet Capital 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 Mendon Capital Advisors allocated the biggest weight to Origin Bancorp, Inc. (NASDAQ:OBNK), around 3.51% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to OBNK.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: PDT Partners. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Arrowstreet Capital).
Let's check out hedge fund activity in other stocks similar to Origin Bancorp, Inc. (NASDAQ:OBNK). We will take a look at TCG BDC, Inc. (NASDAQ:CGBD), Neoleukin Therapeutics, Inc. (NASDAQ:NLTX), Fusion Pharmaceuticals Inc. (NASDAQ:FUSN), Extreme Networks, Inc (NASDAQ:EXTR), CymaBay Therapeutics Inc (NASDAQ:CBAY), Tredegar Corporation (NYSE:TG), and The Bancorp, Inc. (NASDAQ:TBBK). This group of stocks' market caps resemble OBNK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CGBD,6,28998,-2 NLTX,19,196607,0 FUSN,10,139823,-9 EXTR,16,68641,-2 CBAY,18,209182,-6 TG,12,52414,1 TBBK,18,55468,4 Average,14.1,107305,-2 [/table]
As you can see these stocks had an average of 14.1 hedge funds with bullish positions and the average amount invested in these stocks was $107 million. That figure was $9 million in OBNK's case. Neoleukin Therapeutics, Inc. (NASDAQ:NLTX) is the most popular stock in this table. On the other hand TCG BDC, Inc. (NASDAQ:CGBD) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Origin Bancorp, Inc. (NASDAQ:OBNK) is even less popular than CGBD. Our overall hedge fund sentiment score for OBNK is 27.5. 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. Hedge funds clearly dropped the ball on OBNK as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on OBNK as the stock returned 26.9% since Q3 (through November 27th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
