Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That’s why we pay special attention to hedge fund activity in these stocks.
Metropolitan Bank Holding Corp. (NYSE:MCB) shareholders have witnessed a decrease in activity from the world’s largest hedge funds recently. Our calculations also showed that MCB isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to 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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike other investors who track every movement of the 25 largest hedge funds, our long-short investment strategy relies on hedge fund buy/sell signals given by the 100 best performing hedge funds. Let’s go over the latest hedge fund action surrounding Metropolitan Bank Holding Corp. (NYSE:MCB).
What does smart money think about Metropolitan Bank Holding Corp. (NYSE:MCB)?
Heading into the third quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the first quarter of 2019. By comparison, 7 hedge funds held shares or bullish call options in MCB 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.
More specifically, Endicott Management was the largest shareholder of Metropolitan Bank Holding Corp. (NYSE:MCB), with a stake worth $28.5 million reported as of the end of March. Trailing Endicott Management was EJF Capital, which amassed a stake valued at $18.5 million. Basswood Capital, Renaissance Technologies, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Because Metropolitan Bank Holding Corp. (NYSE:MCB) has witnessed bearish sentiment from the smart money, logic holds that there were a few funds that decided to sell off their full holdings in the second quarter. Interestingly, Ken Griffin’s Citadel Investment Group said goodbye to the biggest investment of all the hedgies followed by Insider Monkey, valued at an estimated $0.2 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP 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 2 funds in the second quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Metropolitan Bank Holding Corp. (NYSE:MCB) but similarly valued. These stocks are Citizens, Inc. (NYSE:CIA), Global Medical REIT Inc. (NYSE:GMRE), Capital Southwest Corporation (NASDAQ:CSWC), and Arcus Biosciences, Inc. (NYSE:RCUS). This group of stocks’ market caps are closest to MCB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CIA | 2 | 2171 | 0 |
| GMRE | 13 | 16801 | -3 |
| CSWC | 10 | 46735 | 3 |
| RCUS | 14 | 57735 | 6 |
| Average | 9.75 | 30861 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $63 million in MCB’s case. Arcus Biosciences, Inc. (NYSE:RCUS) is the most popular stock in this table. On the other hand Citizens, Inc. (NYSE:CIA) is the least popular one with only 2 bullish hedge fund positions. Metropolitan Bank Holding Corp. (NYSE:MCB) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately MCB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MCB investors were disappointed as the stock returned -10.6% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
