We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards First Bancorp (NASDAQ:FBNC).
First Bancorp (NASDAQ:FBNC) was in 14 hedge funds’ portfolios at the end of the second quarter of 2019. FBNC has seen a decrease in support from the world’s most elite money managers in recent months. There were 16 hedge funds in our database with FBNC holdings at the end of the previous quarter. Our calculations also showed that FBNC isn’t among the 30 most popular stocks among hedge funds (see the video below).
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to analyze the latest hedge fund action surrounding First Bancorp (NASDAQ:FBNC).
How are hedge funds trading First Bancorp (NASDAQ:FBNC)?
Heading into the third quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the first quarter of 2019. By comparison, 16 hedge funds held shares or bullish call options in FBNC a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of First Bancorp (NASDAQ:FBNC), with a stake worth $23.8 million reported as of the end of March. Trailing Renaissance Technologies was Mendon Capital Advisors, which amassed a stake valued at $23.3 million. Millennium Management, Forest Hill Capital, and Castine Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Because First Bancorp (NASDAQ:FBNC) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there is a sect of money managers that slashed their entire stakes heading into Q3. It’s worth mentioning that Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital said goodbye to the biggest investment of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $0.4 million in stock, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital was right behind this move, as the fund said goodbye to about $0 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 2 funds heading into Q3.
Let’s check out hedge fund activity in other stocks similar to First Bancorp (NASDAQ:FBNC). We will take a look at BrightSphere Investment Group Inc. (NYSE:BSIG), Tennant Company (NYSE:TNC), The St. Joe Company (NYSE:JOE), and Primoris Services Corp (NASDAQ:PRIM). This group of stocks’ market caps are similar to FBNC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BSIG | 19 | 325677 | -2 |
| TNC | 6 | 64973 | -9 |
| JOE | 12 | 506445 | -1 |
| PRIM | 12 | 30523 | 2 |
| Average | 12.25 | 231905 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $232 million. That figure was $88 million in FBNC’s case. BrightSphere Investment Group Inc. (NYSE:BSIG) is the most popular stock in this table. On the other hand Tennant Company (NYSE:TNC) is the least popular one with only 6 bullish hedge fund positions. First Bancorp (NASDAQ:FBNC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately FBNC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FBNC were disappointed as the stock returned -1.1% during the third 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
