In this article we will take a look at whether hedge funds think First Business Financial Services Inc (NASDAQ:FBIZ) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Hedge fund interest in First Business Financial Services Inc (NASDAQ:FBIZ) shares was flat at the end of last quarter. This is usually a negative indicator. 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 BankFinancial Corporation (NASDAQ:BFIN), Luokung Technology Corp (NASDAQ:LKCO), and U.S. Silica Holdings Inc (NYSE:SLCA) to gather more data points. Our calculations also showed that FBIZ 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.
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 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 51 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.
Roger Ibbotson of Zebra Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/dissed by legendary Bill Miller. 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 go over the new hedge fund action surrounding First Business Financial Services Inc (NASDAQ:FBIZ).
How are hedge funds trading First Business Financial Services Inc (NASDAQ:FBIZ)?
At Q1’s end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 2 hedge funds with a bullish position in FBIZ 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.
Of the funds tracked by Insider Monkey, Renaissance Technologies has the most valuable position in First Business Financial Services Inc (NASDAQ:FBIZ), worth close to $4.3 million, corresponding to less than 0.1%% of its total 13F portfolio. The second largest stake is held by Millennium Management, led by Israel Englander, holding a $0.3 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions consist of David Harding’s Winton Capital Management, Roger Ibbotson’s Zebra Capital Management and . In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to First Business Financial Services Inc (NASDAQ:FBIZ), around 0.27% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.0048 percent of its 13F equity portfolio to FBIZ.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as First Business Financial Services Inc (NASDAQ:FBIZ) but similarly valued. These stocks are BankFinancial Corporation (NASDAQ:BFIN), Luokung Technology Corp (NASDAQ:LKCO), U.S. Silica Holdings Inc (NYSE:SLCA), and OptimizeRx Corporation (NASDAQ:OPRX). This group of stocks’ market values are closest to FBIZ’s market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BFIN,4,9853,0 LKCO,1,206,-1 SLCA,12,33061,-4 OPRX,4,16355,-2 Average,5.25,14869,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $5 million in FBIZ’s case. U.S. Silica Holdings Inc (NYSE:SLCA) is the most popular stock in this table. On the other hand Luokung Technology Corp (NASDAQ:LKCO) is the least popular one with only 1 bullish hedge fund positions. First Business Financial Services Inc (NASDAQ:FBIZ) is not the least popular stock in this group but hedge fund interest is still below average. 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately FBIZ wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); FBIZ investors were disappointed as the stock returned 7.8% during the second quarter 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.
Disclosure: None. This article was originally published at Insider Monkey.