Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. After several tireless days we have finished crunching the numbers from nearly 835 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards First Financial Bancorp (NASDAQ:FFBC).
First Financial Bancorp (NASDAQ:FFBC) investors should be aware of a decrease in support from the world’s most elite money managers recently. FFBC was in 5 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 7 hedge funds in our database with FFBC positions at the end of the previous quarter. Our calculations also showed that FFBC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Griffin of Citadel Investment Group
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 read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s analyze the recent hedge fund action encompassing First Financial Bancorp (NASDAQ:FFBC).
How have hedgies been trading First Financial Bancorp (NASDAQ:FFBC)?
At Q4’s end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -29% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FFBC over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Citadel Investment Group was the largest shareholder of First Financial Bancorp (NASDAQ:FFBC), with a stake worth $3 million reported as of the end of September. Trailing Citadel Investment Group was GLG Partners, which amassed a stake valued at $1.5 million. PEAK6 Capital Management, AlphaCrest Capital Management, and Royce & Associates 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 AlphaCrest Capital Management allocated the biggest weight to First Financial Bancorp (NASDAQ:FFBC), around 0.05% of its 13F portfolio. GLG Partners is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to FFBC.
Due to the fact that First Financial Bancorp (NASDAQ:FFBC) has witnessed bearish sentiment from hedge fund managers, it’s safe to say that there lies a certain “tier” of hedgies that decided to sell off their positions entirely by the end of the third quarter. Interestingly, Renaissance Technologies cut the largest position of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $4.4 million in stock. Israel Englander’s fund, Millennium Management, also cut its stock, about $1.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as First Financial Bancorp (NASDAQ:FFBC) but similarly valued. These stocks are Innospec Inc. (NASDAQ:IOSP), Werner Enterprises, Inc. (NASDAQ:WERN), Premier Inc (NASDAQ:PINC), and Artisan Partners Asset Management Inc (NYSE:APAM). All of these stocks’ market caps match FFBC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IOSP | 18 | 114008 | -2 |
| WERN | 21 | 140926 | 1 |
| PINC | 14 | 219803 | -7 |
| APAM | 16 | 265487 | 3 |
| Average | 17.25 | 185056 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $185 million. That figure was $6 million in FFBC’s case. Werner Enterprises, Inc. (NASDAQ:WERN) is the most popular stock in this table. On the other hand Premier Inc (NASDAQ:PINC) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks First Financial Bancorp (NASDAQ:FFBC) is even less popular than PINC. Hedge funds dodged a bullet by taking a bearish stance towards FFBC. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately FFBC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); FFBC investors were disappointed as the stock returned -45.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
