While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Atlantic Union Bankshares Corporation (NASDAQ:AUB).
Hedge fund interest in Atlantic Union Bankshares Corporation (NASDAQ:AUB) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare AUB to other stocks including NuStar Energy L.P. (NYSE:NS), SiteOne Landscape Supply, Inc. (NYSE:SITE), and Regal Beloit Corporation (NYSE:RBC) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Ken Griffin of Citadel Investment Group
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to take a look at the new hedge fund action surrounding Atlantic Union Bankshares Corporation (NASDAQ:AUB).
What does smart money think about Atlantic Union Bankshares Corporation (NASDAQ:AUB)?
At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 4 hedge funds held shares or bullish call options in AUB a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Atlantic Union Bankshares Corporation (NASDAQ:AUB) was held by Renaissance Technologies, which reported holding $18.1 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $1.4 million position. The only other hedge fund that is bullish on the company was Arrowstreet Capital.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: GLG Partners. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Arrowstreet Capital).
Let’s go over hedge fund activity in other stocks similar to Atlantic Union Bankshares Corporation (NASDAQ:AUB). We will take a look at NuStar Energy L.P. (NYSE:NS), SiteOne Landscape Supply, Inc. (NYSE:SITE), Regal Beloit Corporation (NYSE:RBC), and South Jersey Industries Inc (NYSE:SJI). This group of stocks’ market valuations are closest to AUB’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NS | 2 | 1883 | 0 |
| SITE | 13 | 53748 | 1 |
| RBC | 18 | 205507 | 1 |
| SJI | 12 | 64716 | -1 |
| Average | 11.25 | 81464 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $81 million. That figure was $20 million in AUB’s case. Regal Beloit Corporation (NYSE:RBC) is the most popular stock in this table. On the other hand NuStar Energy L.P. (NYSE:NS) is the least popular one with only 2 bullish hedge fund positions. Atlantic Union Bankshares Corporation (NASDAQ:AUB) 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 AUB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AUB investors were disappointed as the stock returned 2.2% 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.