Do Hedge Funds Love Sterling Bancorp, Inc. (SBT)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Sterling Bancorp, Inc. (NASDAQ:SBT).

Sterling Bancorp, Inc. (NASDAQ:SBT) shareholders have witnessed a decrease in hedge fund interest in recent months. Sterling Bancorp, Inc. (NASDAQ:SBT) was in 5 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 12. There were 6 hedge funds in our database with SBT holdings at the end of December. Our calculations also showed that SBT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 115 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.

Peter Rathjens of Arrowstreet 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 we’re going to take a gander at the fresh hedge fund action encompassing Sterling Bancorp, Inc. (NASDAQ:SBT).

Do Hedge Funds Think SBT Is A Good Stock To Buy Now?

At first quarter’s end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SBT over the last 23 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Sterling Bancorp, Inc. (NASDAQ:SBT), which was worth $2.1 million at the end of the fourth quarter. On the second spot was D E Shaw which amassed $0.1 million worth of shares. Arrowstreet Capital, Two Sigma Advisors, and PDT 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 PDT Partners allocated the biggest weight to Sterling Bancorp, Inc. (NASDAQ:SBT), around 0.0041% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.0026 percent of its 13F equity portfolio to SBT.

Due to the fact that Sterling Bancorp, Inc. (NASDAQ:SBT) has experienced a decline in interest from hedge fund managers, we can see that there was a specific group of funds who sold off their entire stakes in the first quarter. Interestingly, Ron Mass’s Almitas Capital sold off the largest investment of all the hedgies watched by Insider Monkey, totaling an estimated $0.3 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund dumped about $0.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds in the first quarter.

Let’s check out hedge fund activity in other stocks similar to Sterling Bancorp, Inc. (NASDAQ:SBT). We will take a look at Saratoga Investment Corp (NYSE:SAR), Mustang Bio, Inc. (NASDAQ:MBIO), SCVX Corp. (NYSE:SCVX), Decibel Therapeutics, Inc. (NASDAQ:DBTX), Orbital Energy Group, Inc. (NASDAQ:OEG), Full House Resorts, Inc. (NASDAQ:FLL), and Daktronics, Inc. (NASDAQ:DAKT). All of these stocks’ market caps match SBT’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.1 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $2 million in SBT’s case. SCVX Corp. (NYSE:SCVX) is the most popular stock in this table. On the other hand Saratoga Investment Corp (NYSE:SAR) is the least popular one with only 2 bullish hedge fund positions. Sterling Bancorp, Inc. (NASDAQ:SBT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SBT is 22.8. 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 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 surpassed the market again by 6.1 percentage points. Unfortunately SBT wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SBT investors were disappointed as the stock returned -20.1% since the end of March (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

Disclosure: None. This article was originally published at Insider Monkey.

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