Hedge Funds Are Crazy About Sterling Bancorp (STL)

Sterling Bancorp (NYSE:STL) has seen an increase in hedge fund sentiment lately.

According to most market participants, hedge funds are perceived as worthless, old investment tools of yesteryear. While there are greater than 8000 funds with their doors open at the moment, we look at the bigwigs of this group, about 450 funds. Most estimates calculate that this group oversees most of the hedge fund industry’s total capital, and by paying attention to their top investments, we have deciphered a number of investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Equally as important, bullish insider trading sentiment is a second way to break down the marketplace. There are a number of motivations for an insider to sell shares of his or her company, but just one, very clear reason why they would initiate a purchase. Many academic studies have demonstrated the market-beating potential of this tactic if “monkeys” know where to look (learn more here).

Consequently, it’s important to take a look at the recent action regarding Sterling Bancorp (NYSE:STL).

How are hedge funds trading Sterling Bancorp (NYSE:STL)?

At Q1’s end, a total of 8 of the hedge funds we track were long in this stock, a change of 60% from the previous quarter. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings meaningfully.

According to our comprehensive database, Ric Dillon’s Diamond Hill Capital had the most valuable position in Sterling Bancorp (NYSE:STL), worth close to $7.5 million, comprising 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Mario Gabelli of GAMCO Investors, with a $6.4 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other hedge funds that are bullish include Matthew Lindenbaum’s Basswood Capital, Jim Simons’s Renaissance Technologies and John Overdeck and David Siegel’s Two Sigma Advisors.

Consequently, specific money managers were breaking ground themselves. Basswood Capital, managed by Matthew Lindenbaum, assembled the biggest position in Sterling Bancorp (NYSE:STL). Basswood Capital had 3.6 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.3 million investment in the stock during the quarter. The only other fund with a brand new STL position is Israel Englander’s Millennium Management.

How have insiders been trading Sterling Bancorp (NYSE:STL)?

Bullish insider trading is best served when the company in focus has seen transactions within the past six months. Over the last 180-day time frame, Sterling Bancorp (NYSE:STL) has seen 1 unique insiders purchasing, and 1 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Sterling Bancorp (NYSE:STL). These stocks are Sun Bancorp, Inc. /NJ (NASDAQ:SNBC), Hudson Valley Holding Corp. (NYSE:HVB), Hometrust Bancshares Inc (NASDAQ:HTBI), Arrow Financial Corporation (NASDAQ:AROW), and Bryn Mawr Bank Corp. (NASDAQ:BMTC). This group of stocks are the members of the regional – northeast banks industry and their market caps resemble STL’s market cap.

With the returns exhibited by Insider Monkey’s tactics, retail investors must always pay attention to hedge fund and insider trading activity, and Sterling Bancorp (NYSE:STL) is no exception.

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