Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 12 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of First United Corp (NASDAQ:FUNC).
First United Corp (NASDAQ:FUNC) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Avadel Pharmaceuticals plc (NASDAQ:AVDL), Provident Financial Holdings, Inc. (NASDAQ:PROV), and Xunlei Ltd (NASDAQ:XNET) to gather more data points. Our calculations also showed that FUNC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are a multitude of gauges stock market investors can use to value their stock investments. A pair of the less utilized gauges are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the elite fund managers can outpace their index-focused peers by a significant amount (see the details here).
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s analyze the latest hedge fund action encompassing First United Corp (NASDAQ:FUNC).
What have hedge funds been doing with First United Corp (NASDAQ:FUNC)?
At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2019. On the other hand, there were a total of 4 hedge funds with a bullish position in FUNC a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
More specifically, Tontine Asset Management was the largest shareholder of First United Corp (NASDAQ:FUNC), with a stake worth $8.4 million reported as of the end of September. Trailing Tontine Asset Management was EJF Capital, which amassed a stake valued at $5.2 million. Renaissance Technologies, Paloma Partners, and Millennium Management 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 Tontine Asset Management allocated the biggest weight to First United Corp (NASDAQ:FUNC), around 1.2% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, dishing out 0.71 percent of its 13F equity portfolio to FUNC.
Due to the fact that First United Corp (NASDAQ:FUNC) has faced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there was a specific group of funds who sold off their full holdings heading into Q4. Interestingly, Paul Magidson, Jonathan Cohen. And Ostrom Enders’s Castine Capital Management sold off the largest stake of all the hedgies monitored by Insider Monkey, comprising an estimated $3.4 million in stock, and Matthew Lindenbaum’s Basswood Capital was right behind this move, as the fund said goodbye to about $0.5 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to First United Corp (NASDAQ:FUNC). We will take a look at Avadel Pharmaceuticals plc (NASDAQ:AVDL), Provident Financial Holdings, Inc. (NASDAQ:PROV), Xunlei Ltd (NASDAQ:XNET), and OFS Capital Corp (NASDAQ:OFS). This group of stocks’ market caps are similar to FUNC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AVDL | 7 | 30296 | 2 |
| PROV | 1 | 9382 | 0 |
| XNET | 2 | 425 | -3 |
| OFS | 2 | 3102 | 0 |
| Average | 3 | 10801 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $16 million in FUNC’s case. Avadel Pharmaceuticals plc (NASDAQ:AVDL) is the most popular stock in this table. On the other hand Provident Financial Holdings, Inc. (NASDAQ:PROV) is the least popular one with only 1 bullish hedge fund positions. First United Corp (NASDAQ:FUNC) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on FUNC, though not to the same extent, as the stock returned 9.2% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.