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 (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 the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was First Citizens BancShares Inc. (NASDAQ:FCNCA).
Is First Citizens BancShares Inc. (NASDAQ:FCNCA) a superb investment today? Prominent investors are taking a bullish view. The number of long hedge fund positions advanced by 5 in recent months. Our calculations also showed that FCNCA 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).
To the average investor there are several tools stock traders employ to value stocks. Two of the most useful tools are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the elite money managers can trounce the market by a superb margin (see the details here).
Chuck Royce of Royce & 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. Keeping this in mind let’s view the recent hedge fund action surrounding First Citizens BancShares Inc. (NASDAQ:FCNCA).
Hedge fund activity in First Citizens BancShares Inc. (NASDAQ:FCNCA)
At Q4’s end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 28% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FCNCA over the last 18 quarters. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of First Citizens BancShares Inc. (NASDAQ:FCNCA), with a stake worth $61.1 million reported as of the end of September. Trailing Royce & Associates was AQR Capital Management, which amassed a stake valued at $59.6 million. Renaissance Technologies, Arrowstreet Capital, and Basswood Capital 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 Huber Capital Management allocated the biggest weight to First Citizens BancShares Inc. (NASDAQ:FCNCA), around 0.94% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, designating 0.56 percent of its 13F equity portfolio to FCNCA.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the most outsized position in First Citizens BancShares Inc. (NASDAQ:FCNCA). Marshall Wace LLP had $6.4 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $1.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Noam Gottesman’s GLG Partners, Donald Sussman’s Paloma Partners, and Benjamin A. Smith’s Laurion Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as First Citizens BancShares Inc. (NASDAQ:FCNCA) but similarly valued. We will take a look at KT Corporation (NYSE:KT), Williams-Sonoma, Inc. (NYSE:WSM), Popular Inc (NASDAQ:BPOP), and Avalara, Inc. (NYSE:AVLR). All of these stocks’ market caps are closest to FCNCA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KT | 17 | 259132 | -5 |
| WSM | 29 | 336409 | 3 |
| BPOP | 33 | 817539 | 2 |
| AVLR | 47 | 1055451 | -1 |
| Average | 31.5 | 617133 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.5 hedge funds with bullish positions and the average amount invested in these stocks was $617 million. That figure was $200 million in FCNCA’s case. Avalara, Inc. (NYSE:AVLR) is the most popular stock in this table. On the other hand KT Corporation (NYSE:KT) is the least popular one with only 17 bullish hedge fund positions. First Citizens BancShares Inc. (NASDAQ:FCNCA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 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 beat the market by 5.5 percentage points. Unfortunately FCNCA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FCNCA investors were disappointed as the stock returned -38.1% during the same time period 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.
