The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May and August as this time China pivoted and Trump put more pressure on China by increasing tariffs. Fourth quarter brought optimism to the markets and hedge funds’ top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 37.4% through the end of November, vs. a gain of 27.5% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards First Community Bankshares, Inc. (NASDAQ:FCBC), and what that likely means for the prospects of the company and its stock.
First Community Bankshares, Inc. (NASDAQ:FCBC) was in 8 hedge funds’ portfolios at the end of September. FCBC has seen an increase in hedge fund sentiment recently. There were 3 hedge funds in our database with FCBC positions at the end of the previous quarter. Our calculations also showed that FCBC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the key hedge fund action encompassing First Community Bankshares, Inc. (NASDAQ:FCBC).
What does smart money think about First Community Bankshares, Inc. (NASDAQ:FCBC)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 167% from the previous quarter. By comparison, 4 hedge funds held shares or bullish call options in FCBC a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of First Community Bankshares, Inc. (NASDAQ:FCBC), with a stake worth $8.5 million reported as of the end of September. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $1 million. Millennium Management, Citadel Investment Group, and ExodusPoint 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 ExodusPoint Capital allocated the biggest weight to First Community Bankshares, Inc. (NASDAQ:FCBC), around 0.01% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to FCBC.
Now, key hedge funds were breaking ground themselves. Millennium Management, managed by Israel Englander, established the largest position in First Community Bankshares, Inc. (NASDAQ:FCBC). Millennium Management had $1 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.4 million investment in the stock during the quarter. The following funds were also among the new FCBC investors: Michael Gelband’s ExodusPoint Capital, David Harding’s Winton Capital Management, and Paul Marshall and Ian Wace’s Marshall Wace.
Let’s also examine hedge fund activity in other stocks similar to First Community Bankshares, Inc. (NASDAQ:FCBC). These stocks are Organigram Holdings Inc. (NASDAQ:OGI), Contura Energy, Inc. (NYSE:CTRA), Carbonite Inc (NASDAQ:CARB), and Digital Turbine Inc (NASDAQ:APPS). All of these stocks’ market caps match FCBC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OGI | 6 | 2915 | 1 |
| CTRA | 21 | 201571 | -1 |
| CARB | 24 | 78036 | 5 |
| APPS | 19 | 32614 | 8 |
| Average | 17.5 | 78784 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $12 million in FCBC’s case. Carbonite Inc (NASDAQ:CARB) is the most popular stock in this table. On the other hand Organigram Holdings Inc. (NASDAQ:OGI) is the least popular one with only 6 bullish hedge fund positions. First Community Bankshares, Inc. (NASDAQ:FCBC) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately FCBC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FCBC investors were disappointed as the stock returned -5.1% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
