We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Fifth Third Bancorp (NASDAQ:FITB) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Fifth Third Bancorp (NASDAQ:FITB) investors should be aware of an increase in support from the world’s most elite money managers lately. Our calculations also showed that FITB isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most shareholders, hedge funds are perceived as underperforming, old financial tools of yesteryear. While there are more than 8000 funds in operation at present, Our researchers look at the upper echelon of this club, about 850 funds. Most estimates calculate that this group of people orchestrate the lion’s share of the smart money’s total capital, and by tailing their best investments, Insider Monkey has figured out many investment strategies that have historically outpaced Mr. Market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Richard S. Pzena of Pzena Investment Management
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 we’re going to take a look at the recent hedge fund action encompassing Fifth Third Bancorp (NASDAQ:FITB).
Hedge fund activity in Fifth Third Bancorp (NASDAQ:FITB)
Heading into the first quarter of 2020, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the third quarter of 2019. By comparison, 31 hedge funds held shares or bullish call options in FITB a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, AQR Capital Management, managed by Cliff Asness, holds the largest position in Fifth Third Bancorp (NASDAQ:FITB). AQR Capital Management has a $217.6 million position in the stock, comprising 0.2% of its 13F portfolio. The second most bullish fund manager is Richard S. Pzena of Pzena Investment Management, with a $162.1 million position; 0.8% of its 13F portfolio is allocated to the company. Some other peers that are bullish consist of Ken Griffin’s Citadel Investment Group, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Hourglass Capital allocated the biggest weight to Fifth Third Bancorp (NASDAQ:FITB), around 3.48% of its 13F portfolio. Azora Capital is also relatively very bullish on the stock, designating 1.89 percent of its 13F equity portfolio to FITB.
As one would reasonably expect, some big names have jumped into Fifth Third Bancorp (NASDAQ:FITB) headfirst. Point72 Asset Management, managed by Steve Cohen, created the most valuable position in Fifth Third Bancorp (NASDAQ:FITB). Point72 Asset Management had $22.2 million invested in the company at the end of the quarter. Ravi Chopra’s Azora Capital also made a $13.3 million investment in the stock during the quarter. The other funds with brand new FITB positions are John D. Gillespie’s Prospector Partners, Joe DiMenna’s ZWEIG DIMENNA PARTNERS, and Jinghua Yan’s TwinBeech Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Fifth Third Bancorp (NASDAQ:FITB) but similarly valued. We will take a look at Ventas, Inc. (NYSE:VTR), Halliburton Company (NYSE:HAL), Sprint Corporation (NYSE:S), and ORIX Corporation (NYSE:IX). This group of stocks’ market values are similar to FITB’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VTR | 29 | 655629 | 13 |
| HAL | 31 | 1208089 | -4 |
| S | 35 | 778974 | 11 |
| IX | 6 | 8292 | 1 |
| Average | 25.25 | 662746 | 5.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $663 million. That figure was $846 million in FITB’s case. Sprint Corporation (NYSE:S) is the most popular stock in this table. On the other hand ORIX Corporation (NYSE:IX) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Fifth Third Bancorp (NASDAQ:FITB) is more popular among hedge funds. 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 22.3% in 2020 through March 16th and still beat the market by 3.2 percentage points. Unfortunately FITB wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FITB were disappointed as the stock returned -55.1% during the first two and a half months of 2020 (through March 16th) 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 most of these stocks already outperformed the market in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
