We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like First Bancorp (NYSE:FBP).
First Bancorp (NYSE:FBP) was in 23 hedge funds’ portfolios at the end of June. FBP investors should be aware of an increase in enthusiasm from smart money recently. There were 18 hedge funds in our database with FBP holdings at the end of the previous quarter. Our calculations also showed that FBP isn’t among the 30 most popular stocks among hedge funds (view 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 former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s analyze the recent hedge fund action regarding First Bancorp (NYSE:FBP).
What does smart money think about First Bancorp (NYSE:FBP)?
Heading into the third quarter of 2019, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 28% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in FBP over the last 16 quarters. So, let’s check 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, Anand Parekh’s Alyeska Investment Group has the most valuable position in First Bancorp (NYSE:FBP), worth close to $46.6 million, accounting for 0.6% of its total 13F portfolio. Coming in second is Millennium Management, led by Israel Englander, holding a $31.2 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions contain Steve Cohen’s Point72 Asset Management, John Overdeck and David Siegel’s Two Sigma Advisors and Noam Gottesman’s GLG Partners.
Now, specific money managers were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the largest position in First Bancorp (NYSE:FBP). Marshall Wace LLP had $3 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $2.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Benjamin A. Smith’s Laurion Capital Management, Thomas Bailard’s Bailard Inc, and Mike Vranos’s Ellington.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as First Bancorp (NYSE:FBP) but similarly valued. We will take a look at Sunrun Inc (NASDAQ:RUN), Cactus, Inc. (NYSE:WHD), Evertec Inc (NYSE:EVTC), and Quidel Corporation (NASDAQ:QDEL). This group of stocks’ market valuations match FBP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RUN | 17 | 498057 | 2 |
| WHD | 24 | 210166 | -3 |
| EVTC | 22 | 307810 | 1 |
| QDEL | 14 | 91509 | -4 |
| Average | 19.25 | 276886 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $277 million. That figure was $215 million in FBP’s case. Cactus, Inc. (NYSE:WHD) is the most popular stock in this table. On the other hand Quidel Corporation (NASDAQ:QDEL) is the least popular one with only 14 bullish hedge fund positions. First Bancorp (NYSE:FBP) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 FBP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FBP were disappointed as the stock returned -9.3% 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 this year.
Disclosure: None. This article was originally published at Insider Monkey.
