Is First Citizens BancShares Inc. (FCNCA) Going to Burn These Hedge Funds?

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of June 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards First Citizens BancShares Inc. (NASDAQ:FCNCA).

Is First Citizens BancShares Inc. (NASDAQ:FCNCA) a healthy stock for your portfolio? Money managers were taking a bearish view. The number of bullish hedge fund positions retreated by 8 in recent months. First Citizens BancShares Inc. (NASDAQ:FCNCA) was in 21 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 29. Our calculations also showed that FCNCA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 S&P 500 ETFs by 79 percentage points since March 2017 (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.

John Armitage of Egerton Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to view the fresh hedge fund action regarding First Citizens BancShares Inc. (NASDAQ:FCNCA).

Do Hedge Funds Think FCNCA Is A Good Stock To Buy Now?

At second quarter’s end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -28% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FCNCA over the last 24 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Egerton Capital Limited, managed by John Armitage, holds the number one position in First Citizens BancShares Inc. (NASDAQ:FCNCA). Egerton Capital Limited has a $115.7 million position in the stock, comprising 0.6% of its 13F portfolio. The second most bullish fund manager is Southpoint Capital Advisors, led by John Smith Clark, holding a $99.9 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish contain Pasco Alfaro and Richard Turnure’s Miura Global Management, Benjamin Pass’s TOMS Capital and Seth Rosen’s Nitorum Capital. In terms of the portfolio weights assigned to each position Miura Global Management allocated the biggest weight to First Citizens BancShares Inc. (NASDAQ:FCNCA), around 17.93% of its 13F portfolio. TOMS Capital is also relatively very bullish on the stock, setting aside 6.28 percent of its 13F equity portfolio to FCNCA.

Seeing as First Citizens BancShares Inc. (NASDAQ:FCNCA) has faced falling interest from hedge fund managers, logic holds that there exists a select few fund managers that slashed their positions entirely heading into Q3. At the top of the heap, Roberto Mignone’s Bridger Management dropped the biggest investment of the “upper crust” of funds watched by Insider Monkey, valued at about $16.7 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund dropped about $15.8 million worth. These transactions are important to note, as total hedge fund interest fell by 8 funds heading into Q3.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as First Citizens BancShares Inc. (NASDAQ:FCNCA) but similarly valued. We will take a look at Fate Therapeutics Inc (NASDAQ:FATE), ContextLogic Inc. (NASDAQ:WISH), Kilroy Realty Corp (NYSE:KRC), Nutanix, Inc. (NASDAQ:NTNX), Tilray, Inc. (NASDAQ:TLRY), OneMain Holdings Inc (NYSE:OMF), and Beam Therapeutics Inc. (NASDAQ:BEAM). All of these stocks’ market caps match FCNCA’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.9 hedge funds with bullish positions and the average amount invested in these stocks was $1025 million. That figure was $687 million in FCNCA’s case. OneMain Holdings Inc (NYSE:OMF) is the most popular stock in this table. On the other hand Tilray, Inc. (NASDAQ:TLRY) is the least popular one with only 17 bullish hedge fund positions. First Citizens BancShares Inc. (NASDAQ:FCNCA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FCNCA is 27.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately FCNCA wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); FCNCA investors were disappointed as the stock returned 1.5% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.

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