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 First Community Corporation (NASDAQ:FCCO).
First Community Corporation (NASDAQ:FCCO) investors should be aware of a decrease in enthusiasm from smart money in recent months. FCCO was in 3 hedge funds’ portfolios at the end of the third quarter of 2019. There were 4 hedge funds in our database with FCCO holdings at the end of the previous quarter. Our calculations also showed that FCCO 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.
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 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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 view the key hedge fund action regarding First Community Corporation (NASDAQ:FCCO).
What have hedge funds been doing with First Community Corporation (NASDAQ:FCCO)?
Heading into the fourth quarter of 2019, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FCCO over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Elizabeth Park Capital Management was the largest shareholder of First Community Corporation (NASDAQ:FCCO), with a stake worth $6.1 million reported as of the end of September. Trailing Elizabeth Park Capital Management was Renaissance Technologies, which amassed a stake valued at $1.7 million. Paloma Partners was 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 Elizabeth Park Capital Management allocated the biggest weight to First Community Corporation (NASDAQ:FCCO), around 2.41% of its 13F portfolio. Paloma Partners is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to FCCO.
Judging by the fact that First Community Corporation (NASDAQ:FCCO) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain “tier” of funds who sold off their positions entirely in the third quarter. At the top of the heap, Israel Englander’s Millennium Management dumped the biggest stake of the “upper crust” of funds monitored by Insider Monkey, totaling close to $0.6 million in stock. Andrew Weiss’s fund, Weiss Asset Management, also dumped its stock, about $0.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 1 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as First Community Corporation (NASDAQ:FCCO) but similarly valued. We will take a look at Alithya Group inc. (NASDAQ:ALYA), Aspen Aerogels Inc (NYSE:ASPN), Chimerix Inc (NASDAQ:CMRX), and Pangaea Logistics Solutions, Ltd. (NASDAQ:PANL). This group of stocks’ market caps match FCCO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ALYA | 5 | 15097 | -1 |
| ASPN | 6 | 17246 | 2 |
| CMRX | 11 | 25753 | 0 |
| PANL | 2 | 145 | -1 |
| Average | 6 | 14560 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $8 million in FCCO’s case. Chimerix Inc (NASDAQ:CMRX) is the most popular stock in this table. On the other hand Pangaea Logistics Solutions, Ltd. (NASDAQ:PANL) is the least popular one with only 2 bullish hedge fund positions. First Community Corporation (NASDAQ:FCCO) is not the least popular stock in this group but hedge fund interest is still below average. 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 FCCO, though not to the same extent, as the stock returned 6% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.