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 First Bancorp (NYSE:FBP) 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.
First Bancorp (NYSE:FBP) investors should pay attention to an increase in activity from the world’s largest hedge funds lately. FBP was in 32 hedge funds’ portfolios at the end of December. There were 21 hedge funds in our database with FBP positions at the end of the previous quarter. Our calculations also showed that FBP 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).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
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. With all of this in mind we’re going to take a peek at the fresh hedge fund action surrounding First Bancorp (NYSE:FBP).
What have hedge funds been doing with First Bancorp (NYSE:FBP)?
At the end of the fourth quarter, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 52% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FBP over the last 18 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Among these funds, Alyeska Investment Group held the most valuable stake in First Bancorp (NYSE:FBP), which was worth $28.7 million at the end of the third quarter. On the second spot was Millennium Management which amassed $27.2 million worth of shares. EJF Capital, Two Sigma Advisors, and GLG Partners 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 Shoals Capital Management allocated the biggest weight to First Bancorp (NYSE:FBP), around 7.77% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, dishing out 1.73 percent of its 13F equity portfolio to FBP.
As one would reasonably expect, specific money managers were leading the bulls’ herd. EJF Capital, managed by Emanuel J. Friedman, established the largest position in First Bancorp (NYSE:FBP). EJF Capital had $17.3 million invested in the company at the end of the quarter. Jeffrey Hinkle’s Shoals Capital Management also made a $7.9 million investment in the stock during the quarter. The following funds were also among the new FBP investors: David Harding’s Winton Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as First Bancorp (NYSE:FBP) but similarly valued. These stocks are ChemoCentryx Inc (NASDAQ:CCXI), WSFS Financial Corporation (NASDAQ:WSFS), Sprouts Farmers Market Inc (NASDAQ:SFM), and Greif, Inc. (NYSE:GEF). This group of stocks’ market caps are similar to FBP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CCXI | 23 | 531676 | 6 |
| WSFS | 16 | 174571 | 5 |
| SFM | 30 | 331285 | 4 |
| GEF | 18 | 87008 | 3 |
| Average | 21.75 | 281135 | 4.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $281 million. That figure was $194 million in FBP’s case. Sprouts Farmers Market Inc (NASDAQ:SFM) is the most popular stock in this table. On the other hand WSFS Financial Corporation (NASDAQ:WSFS) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks First Bancorp (NYSE:FBP) 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 17.4% in 2020 through March 25th and still beat the market by 5.5 percentage points. Unfortunately FBP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FBP were disappointed as the stock returned -57.8% during the first two and a half months of 2020 (through March 25th) 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.
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.
