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. With this in mind let’s see whether New York Community Bancorp, Inc. (NYSE:NYCB) makes for a good investment at the moment. We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
New York Community Bancorp, Inc. (NYSE:NYCB) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 27 hedge funds’ portfolios at the end of December. 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 National Instruments Corporation (NASDAQ:NATI), EPR Properties (NYSE:EPR), and TFS Financial Corporation (NASDAQ:TFSL) to gather more data points. Our calculations also showed that NYCB 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).
In today’s marketplace there are tons of indicators investors employ to assess stocks. Two of the most under-the-radar indicators are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the elite fund managers can outperform the S&P 500 by a healthy amount (see the details here).
Ray Dalio of Bridgewater Associates
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. Now let’s go over the key hedge fund action regarding New York Community Bancorp, Inc. (NYSE:NYCB).
How are hedge funds trading New York Community Bancorp, Inc. (NYSE:NYCB)?
Heading into the first quarter of 2020, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NYCB over the last 18 quarters. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Among these funds, Kahn Brothers held the most valuable stake in New York Community Bancorp, Inc. (NYSE:NYCB), which was worth $64.6 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $53.5 million worth of shares. Adage Capital Management, Renaissance Technologies, and Winton Capital 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 Kahn Brothers allocated the biggest weight to New York Community Bancorp, Inc. (NYSE:NYCB), around 7.83% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.17 percent of its 13F equity portfolio to NYCB.
Seeing as New York Community Bancorp, Inc. (NYSE:NYCB) has experienced falling interest from the entirety of the hedge funds we track, it’s safe to say that there were a few fund managers that elected to cut their positions entirely last quarter. It’s worth mentioning that Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors said goodbye to the largest position of the 750 funds tracked by Insider Monkey, worth close to $0.4 million in stock. Matthew Tewksbury’s fund, Stevens Capital Management, also dropped its stock, about $0.3 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to New York Community Bancorp, Inc. (NYSE:NYCB). These stocks are National Instruments Corporation (NASDAQ:NATI), EPR Properties (NYSE:EPR), TFS Financial Corporation (NASDAQ:TFSL), and Toll Brothers Inc (NYSE:TOL). This group of stocks’ market valuations are closest to NYCB’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NATI | 30 | 295238 | 3 |
| EPR | 24 | 227647 | 1 |
| TFSL | 11 | 173480 | 3 |
| TOL | 31 | 504909 | 7 |
| Average | 24 | 300319 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $300 million. That figure was $214 million in NYCB’s case. Toll Brothers Inc (NYSE:TOL) is the most popular stock in this table. On the other hand TFS Financial Corporation (NASDAQ:TFSL) is the least popular one with only 11 bullish hedge fund positions. New York Community Bancorp, Inc. (NYSE:NYCB) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. Hedge funds were also right about betting on NYCB, though not to the same extent, as the stock returned -19.9% during the first two and a half months of 2020 (through March 25th) and outperformed the market as well.
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.
