Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about First Republic Bank (NYSE:FRC).
Is First Republic Bank (NYSE:FRC) worth your attention right now? Investors who are in the know were becoming less confident. The number of long hedge fund bets were cut by 7 recently. First Republic Bank (NYSE:FRC) was in 34 hedge funds’ portfolios at the end of June. The all time high for this statistic is 41. Our calculations also showed that FRC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
In today’s marketplace there are tons of gauges stock market investors can use to evaluate publicly traded companies. Two of the most underrated gauges are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the best investment managers can trounce the broader indices by a solid margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
Michael Gelband of ExodusPoint Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV 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 review the new hedge fund action regarding First Republic Bank (NYSE:FRC).
Do Hedge Funds Think FRC Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the first quarter of 2020. On the other hand, there were a total of 37 hedge funds with a bullish position in FRC a year ago. So, let’s examine 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, Robert Joseph Caruso’s Select Equity Group has the most valuable position in First Republic Bank (NYSE:FRC), worth close to $614.7 million, comprising 2.1% of its total 13F portfolio. The second most bullish fund manager is Diamond Hill Capital, managed by Ric Dillon, which holds a $410.2 million position; the fund has 1.6% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish encompass John Osterweis’s Osterweis Capital Management, Ken Fisher’s Fisher Asset Management and Michael Gelband’s ExodusPoint Capital. In terms of the portfolio weights assigned to each position Running Oak Capital allocated the biggest weight to First Republic Bank (NYSE:FRC), around 3.46% of its 13F portfolio. Select Equity Group is also relatively very bullish on the stock, designating 2.1 percent of its 13F equity portfolio to FRC.
Due to the fact that First Republic Bank (NYSE:FRC) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of hedgies who were dropping their positions entirely in the second quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the biggest stake of all the hedgies tracked by Insider Monkey, comprising close to $32.3 million in stock. Clint Carlson’s fund, Carlson Capital, also sold off its stock, about $21 million worth. These moves are important to note, as aggregate hedge fund interest fell by 7 funds in the second quarter.
Let’s now review hedge fund activity in other stocks similar to First Republic Bank (NYSE:FRC). These stocks are Wayfair Inc (NYSE:W), Cloudflare, Inc. (NYSE:NET), Liberty Broadband Corp (NASDAQ:LBRDK), STMicroelectronics N.V. (NYSE:STM), CoStar Group Inc (NASDAQ:CSGP), Corteva, Inc. (NYSE:CTVA), and D.R. Horton, Inc. (NYSE:DHI). This group of stocks’ market valuations are similar to FRC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| W | 35 | 3902769 | -2 |
| NET | 43 | 862578 | -2 |
| LBRDK | 63 | 7386186 | -7 |
| STM | 13 | 159058 | -2 |
| CSGP | 49 | 2816593 | 6 |
| CTVA | 34 | 1283913 | -1 |
| DHI | 45 | 1886955 | -5 |
| Average | 40.3 | 2614007 | -1.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.3 hedge funds with bullish positions and the average amount invested in these stocks was $2614 million. That figure was $1226 million in FRC’s case. Liberty Broadband Corp (NASDAQ:LBRDK) is the most popular stock in this table. On the other hand STMicroelectronics N.V. (NYSE:STM) is the least popular one with only 13 bullish hedge fund positions. First Republic Bank (NYSE:FRC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FRC is 43.9. 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. 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 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. A small number of hedge funds were also right about betting on FRC as the stock returned 8% since the end of the second quarter (through 10/11) and outperformed the market by an even larger margin.
Follow First Republic Bank S F New (NYSE:FRC)
Follow First Republic Bank S F New (NYSE:FRC)
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Disclosure: None. This article was originally published at Insider Monkey.
