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 Investar Holding Corporation (NASDAQ:ISTR)? The smart money sentiment can provide an answer to this question.
Investar Holding Corporation (NASDAQ:ISTR) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds' portfolios at the end of March. Our calculations also showed that ISTR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). 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 TELA Bio, Inc. (NASDAQ:TELA), Kaixin Auto Holdings (NASDAQ:KXIN), and First Business Financial Services Inc (NASDAQ:FBIZ) to gather more data points.
In the eyes of most shareholders, hedge funds are perceived as unimportant, old financial tools of years past. While there are more than 8000 funds in operation at present, We look at the masters of this club, around 850 funds. These money managers direct the lion's share of the hedge fund industry's total capital, and by keeping track of their matchless equity investments, Insider Monkey has identified several investment strategies that have historically outpaced the broader indices. Insider Monkey's flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Emanuel J. Friedman
Emanuel Friedman of EJF Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let's take a glance at the latest hedge fund action regarding Investar Holding Corporation (NASDAQ:ISTR).
Do Hedge Funds Think ISTR Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards ISTR over the last 23 quarters. With hedgies' capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, EJF Capital was the largest shareholder of Investar Holding Corporation (NASDAQ:ISTR), with a stake worth $12.1 million reported as of the end of March. Trailing EJF Capital was Royce & Associates, which amassed a stake valued at $5.1 million. Fourthstone LLC, Renaissance Technologies, and Millennium Management 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 Fourthstone LLC allocated the biggest weight to Investar Holding Corporation (NASDAQ:ISTR), around 0.93% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, dishing out 0.88 percent of its 13F equity portfolio to ISTR.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: JCSD Capital. 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 Millennium Management).
Let's check out hedge fund activity in other stocks similar to Investar Holding Corporation (NASDAQ:ISTR). We will take a look at TELA Bio, Inc. (NASDAQ:TELA), Kaixin Auto Holdings (NASDAQ:KXIN), First Business Financial Services Inc (NASDAQ:FBIZ), Monroe Capital Corp (NASDAQ:MRCC), Matinas Biopharma Holdings, Inc. (NYSE:MTNB), Orion Energy Systems, Inc. (NASDAQ:OESX), and Renren Inc (NYSE:RENN). This group of stocks' market values are closest to ISTR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TELA,9,70631,1 KXIN,5,490,0 FBIZ,3,6057,1 MRCC,3,2470,-2 MTNB,8,1763,-1 OESX,10,17546,1 RENN,3,1091,2 Average,5.9,14293,0.3 [/table]
As you can see these stocks had an average of 5.9 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $21 million in ISTR's case. Orion Energy Systems, Inc. (NASDAQ:OESX) is the most popular stock in this table. On the other hand First Business Financial Services Inc (NASDAQ:FBIZ) is the least popular one with only 3 bullish hedge fund positions. Investar Holding Corporation (NASDAQ:ISTR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ISTR is 38. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and beat the market by 6.1 percentage points. A small number of hedge funds were also right about betting on ISTR, though not to the same extent, as the stock returned 7.8% since the end of Q1 (through June 18th) and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.
