In this article you are going to find out whether hedge funds think Simmons First National Corporation (NASDAQ:SFNC) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Simmons First National Corporation (NASDAQ:SFNC) going to take off soon? Investors who are in the know are selling. The number of bullish hedge fund bets retreated by 2 in recent months. Our calculations also showed that SFNC isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 44 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_27480" align="aligncenter" width="371"] Israel Englander of Millennium Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's take a peek at the recent hedge fund action regarding Simmons First National Corporation (NASDAQ:SFNC).
How are hedge funds trading Simmons First National Corporation (NASDAQ:SFNC)?
Heading into the second quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SFNC over the last 18 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Millennium Management, managed by Israel Englander, holds the largest position in Simmons First National Corporation (NASDAQ:SFNC). Millennium Management has a $1.1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Ken Griffin of Citadel Investment Group, with a $0.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that are bullish encompass D. E. Shaw's D E Shaw, Brandon Haley's Holocene Advisors and . In terms of the portfolio weights assigned to each position Millennium Management allocated the biggest weight to Simmons First National Corporation (NASDAQ:SFNC), around 0.0026% of its 13F portfolio. Holocene Advisors is also relatively very bullish on the stock, setting aside 0.0021 percent of its 13F equity portfolio to SFNC.
Because Simmons First National Corporation (NASDAQ:SFNC) has faced a decline in interest from the entirety of the hedge funds we track, logic holds that there were a few funds that decided to sell off their entire stakes by the end of the third quarter. It's worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital sold off the largest investment of the 750 funds watched by Insider Monkey, worth an estimated $16.1 million in stock. Noam Gottesman's fund, GLG Partners, also dropped its stock, about $1.3 million worth. These transactions are interesting, as total hedge fund interest fell by 2 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Simmons First National Corporation (NASDAQ:SFNC) but similarly valued. These stocks are Diodes Incorporated (NASDAQ:DIOD), DouYu International Holdings Limited (NASDAQ:DOYU), Sterling Bancorp (NYSE:STL), and Intercept Pharmaceuticals Inc (NASDAQ:ICPT). This group of stocks' market values resemble SFNC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DIOD,13,49641,-5 DOYU,15,30200,9 STL,25,176182,-5 ICPT,19,258760,-8 Average,18,128696,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $129 million. That figure was $3 million in SFNC's case. Sterling Bancorp (NYSE:STL) is the most popular stock in this table. On the other hand Diodes Incorporated (NASDAQ:DIOD) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Simmons First National Corporation (NASDAQ:SFNC) is even less popular than DIOD. Hedge funds dodged a bullet by taking a bearish stance towards SFNC. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately SFNC wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); SFNC investors were disappointed as the stock returned -6.8% during the second quarter (through the end of May) 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 so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.