We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 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 Citizens BancShares Inc. (NASDAQ:FCNCA).
Is First Citizens BancShares Inc. (NASDAQ:FCNCA) the right investment to pursue these days? Hedge funds are getting less bullish. The number of bullish hedge fund bets retreated by 1 recently. Our calculations also showed that FCNCA 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.
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 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.
Chuck Royce of Royce & Associates
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. Let’s review the fresh hedge fund action regarding First Citizens BancShares Inc. (NASDAQ:FCNCA).
How have hedgies been trading First Citizens BancShares Inc. (NASDAQ:FCNCA)?
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in FCNCA a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Royce & Associates was the largest shareholder of First Citizens BancShares Inc. (NASDAQ:FCNCA), with a stake worth $56.4 million reported as of the end of September. Trailing Royce & Associates was AQR Capital Management, which amassed a stake valued at $35.2 million. Renaissance Technologies, Arrowstreet Capital, and Huber Capital Management 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 1.05% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, earmarking 0.86 percent of its 13F equity portfolio to FCNCA.
Judging by the fact that First Citizens BancShares Inc. (NASDAQ:FCNCA) has experienced a decline in interest from hedge fund managers, it’s safe to say that there is a sect of hedge funds who were dropping their positions entirely in the third quarter. Intriguingly, Benjamin A. Smith’s Laurion Capital Management dropped the biggest position of the “upper crust” of funds followed by Insider Monkey, comprising close to $1.9 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also cut its stock, about $1.7 million worth. These moves are interesting, as total hedge fund interest was cut by 1 funds in the third quarter.
Let’s now review hedge fund activity in other stocks similar to First Citizens BancShares Inc. (NASDAQ:FCNCA). These stocks are Nordstrom, Inc. (NYSE:JWN), ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), Kemper Corporation (NYSE:KMPR), and Manhattan Associates, Inc. (NASDAQ:MANH). This group of stocks’ market values are closest to FCNCA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JWN | 20 | 178075 | -7 |
| ACAD | 26 | 1910582 | 5 |
| KMPR | 19 | 154935 | 0 |
| MANH | 22 | 440000 | 5 |
| Average | 21.75 | 670898 | 0.75 |
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 $671 million. That figure was $161 million in FCNCA’s case. ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is the most popular stock in this table. On the other hand Kemper Corporation (NYSE:KMPR) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks First Citizens BancShares Inc. (NASDAQ:FCNCA) is even less popular than KMPR. 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. A small number of hedge funds were also right about betting on FCNCA, though not to the same extent, as the stock returned 10.2% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
