Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by nearly 10 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Flagstar Bancorp Inc (NYSE:FBC).
Flagstar Bancorp Inc (NYSE:FBC) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 15 hedge funds’ portfolios at the end of September. At the end of this article we will also compare FBC to other stocks including Deluxe Corporation (NYSE:DLX), Apergy Corporation (NYSE:APY), and The Geo Group, Inc. (NYSE:GEO) to get a better sense of its popularity.
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.
Tom Brown of Second Curve Capital
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. We’re going to take a glance at the latest hedge fund action regarding Flagstar Bancorp Inc (NYSE:FBC).
What does smart money think about Flagstar Bancorp Inc (NYSE:FBC)?
Heading into the fourth quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards FBC over the last 17 quarters. So, let’s check 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 Flagstar Bancorp Inc (NYSE:FBC), with a stake worth $27 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $10 million. D E Shaw, Arrowstreet Capital, and Second Curve Capital 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 Second Curve Capital allocated the biggest weight to Flagstar Bancorp Inc (NYSE:FBC), around 3.14% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, designating 0.42 percent of its 13F equity portfolio to FBC.
Since Flagstar Bancorp Inc (NYSE:FBC) has faced a decline in interest from hedge fund managers, it’s easy to see that there exists a select few hedge funds that elected to cut their entire stakes by the end of the third quarter. Interestingly, Lee Ainslie’s Maverick Capital dropped the biggest position of the 750 funds tracked by Insider Monkey, totaling an estimated $5.6 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dropped about $3.7 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Flagstar Bancorp Inc (NYSE:FBC) but similarly valued. We will take a look at Deluxe Corporation (NYSE:DLX), Apergy Corporation (NYSE:APY), The Geo Group, Inc. (NYSE:GEO), and Adtalem Global Education Inc. (NYSE:ATGE). All of these stocks’ market caps are similar to FBC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DLX | 23 | 134255 | 4 |
| APY | 16 | 87946 | 1 |
| GEO | 21 | 107529 | 1 |
| ATGE | 22 | 200763 | 8 |
| Average | 20.5 | 132623 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $133 million. That figure was $72 million in FBC’s case. Deluxe Corporation (NYSE:DLX) is the most popular stock in this table. On the other hand Apergy Corporation (NYSE:APY) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Flagstar Bancorp Inc (NYSE:FBC) is even less popular than APY. Hedge funds dodged a bullet by taking a bearish stance towards FBC. 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 FBC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); FBC investors were disappointed as the stock returned -0.1% 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.
