Last year’s fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 37.4% in 2019 (through the end of November) and outperformed the S&P 500 ETF by 9.9 percentage points. We are done processing the latest 13F filings and in this article we will study how hedge fund sentiment towards Sterling Bancorp, Inc. (NASDAQ:SBT) changed during the first quarter.
Is Sterling Bancorp, Inc. (NASDAQ:SBT) a sound investment right now? Money managers are in a bearish mood. The number of long hedge fund bets were cut by 1 recently. Our calculations also showed that SBT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). SBT was in 5 hedge funds’ portfolios at the end of the third quarter of 2019. There were 6 hedge funds in our database with SBT positions at the end of the previous quarter.
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.
Jim Simons of Renaissance Technologies
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. With all of this in mind let’s check out the recent hedge fund action encompassing Sterling Bancorp, Inc. (NASDAQ:SBT).
Hedge fund activity in Sterling Bancorp, Inc. (NASDAQ:SBT)
At Q3’s end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SBT over the last 17 quarters. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Among these funds, EJF Capital held the most valuable stake in Sterling Bancorp, Inc. (NASDAQ:SBT), which was worth $3.1 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $2.2 million worth of shares. Basswood Capital, Citadel Investment Group, and Royce & Associates 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 EJF Capital allocated the biggest weight to Sterling Bancorp, Inc. (NASDAQ:SBT), around 0.42% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, designating 0.15 percent of its 13F equity portfolio to SBT.
Because Sterling Bancorp, Inc. (NASDAQ:SBT) has faced a decline in interest from the smart money, logic holds that there is a sect of funds who were dropping their full holdings in the third quarter. Intriguingly, Israel Englander’s Millennium Management said goodbye to the biggest stake of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $0.4 million in stock. Donald Sussman’s fund, Paloma Partners, also said goodbye to its stock, about $0.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds in the third quarter.
Let’s check out hedge fund activity in other stocks similar to Sterling Bancorp, Inc. (NASDAQ:SBT). These stocks are Old Line Bancshares, Inc. (MD) (NASDAQ:OLBK), Amyris Inc (NASDAQ:AMRS), The Hackett Group, Inc. (NASDAQ:HCKT), and Boingo Wireless Inc (NASDAQ:WIFI). This group of stocks’ market valuations are similar to SBT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OLBK | 11 | 50236 | 6 |
| AMRS | 7 | 38037 | -2 |
| HCKT | 16 | 72533 | 1 |
| WIFI | 13 | 42112 | -1 |
| Average | 11.75 | 50730 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $51 million. That figure was $8 million in SBT’s case. The Hackett Group, Inc. (NASDAQ:HCKT) is the most popular stock in this table. On the other hand Amyris Inc (NASDAQ:AMRS) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Sterling Bancorp, Inc. (NASDAQ:SBT) is even less popular than AMRS. Hedge funds dodged a bullet by taking a bearish stance towards SBT. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SBT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SBT investors were disappointed as the stock returned -0.6% during the fourth quarter (through the end of November) 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 so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
