In this article we will take a look at whether hedge funds think Valley National Bancorp (NASDAQ:VLY) 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.
Valley National Bancorp (NASDAQ:VLY) shareholders have witnessed a decrease in enthusiasm from smart money of late. Our calculations also showed that VLY 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
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 trades 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. Now we’re going to take a look at the recent hedge fund action encompassing Valley National Bancorp (NASDAQ:VLY).
What have hedge funds been doing with Valley National Bancorp (NASDAQ:VLY)?
Heading into the second quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the fourth quarter of 2019. On the other hand, there were a total of 11 hedge funds with a bullish position in VLY a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Valley National Bancorp (NASDAQ:VLY) was held by Renaissance Technologies, which reported holding $8.8 million worth of stock at the end of September. It was followed by Millennium Management with a $3.4 million position. Other investors bullish on the company included Royce & Associates, Citadel Investment Group, and Hourglass Capital. In terms of the portfolio weights assigned to each position Hourglass Capital allocated the biggest weight to Valley National Bancorp (NASDAQ:VLY), around 1.18% of its 13F portfolio. Neo Ivy Capital is also relatively very bullish on the stock, dishing out 0.59 percent of its 13F equity portfolio to VLY.
Since Valley National Bancorp (NASDAQ:VLY) has faced bearish sentiment from the smart money, we can see that there were a few hedgies who were dropping their entire stakes in the first quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the biggest position of all the hedgies watched by Insider Monkey, comprising close to $5.3 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund said goodbye to about $3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds in the first quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Valley National Bancorp (NASDAQ:VLY) but similarly valued. We will take a look at Perspecta Inc. (NYSE:PRSP), Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI), Iridium Communications Inc. (NASDAQ:IRDM), and Advanced Disposal Services, Inc. (NYSE:ADSW). This group of stocks’ market values match VLY’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PRSP | 32 | 326939 | -14 |
| OLLI | 19 | 96475 | -9 |
| IRDM | 20 | 228723 | 0 |
| ADSW | 21 | 739563 | -1 |
| Average | 23 | 347925 | -6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $348 million. That figure was $25 million in VLY’s case. Perspecta Inc. (NYSE:PRSP) is the most popular stock in this table. On the other hand Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI) is the least popular one with only 19 bullish hedge fund positions. Valley National Bancorp (NASDAQ:VLY) 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 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately VLY wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); VLY investors were disappointed as the stock returned 17.6% 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.
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Disclosure: None. This article was originally published at Insider Monkey.
