It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 13.1% in the first 2.5 months of this year (including dividend payments). Conversely, hedge funds’ top 15 large-cap stock picks generated a return of 19.7% during the same 2.5-month period, with 93% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Fulton Financial Corp (NASDAQ:FULT).
Hedge fund interest in Fulton Financial Corp (NASDAQ:FULT) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Cathay General Bancorp (NASDAQ:CATY), Immunomedics, Inc. (NASDAQ:IMMU), and J&J Snack Foods Corp. (NASDAQ:JJSF) to gather more data points.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 32 percentage points since May 2014 through March 12, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to take a peek at the fresh hedge fund action encompassing Fulton Financial Corp (NASDAQ:FULT).
What have hedge funds been doing with Fulton Financial Corp (NASDAQ:FULT)?
Heading into the first quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in FULT over the last 14 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in Fulton Financial Corp (NASDAQ:FULT), which was worth $2.6 million at the end of the third quarter. On the second spot was Gardner Russo & Gardner which amassed $1.9 million worth of shares. Moreover, Balyasny Asset Management, Citadel Investment Group, and Two Sigma Advisors were also bullish on Fulton Financial Corp (NASDAQ:FULT), allocating a large percentage of their portfolios to this stock.
Because Fulton Financial Corp (NASDAQ:FULT) has experienced bearish sentiment from the entirety of the hedge funds we track, we can see that there were a few hedgies that slashed their full holdings last quarter. Intriguingly, Ravi Chopra’s Azora Capital dropped the biggest position of all the hedgies tracked by Insider Monkey, valued at an estimated $15.8 million in stock. Gregg Moskowitz’s fund, Interval Partners, also cut its stock, about $3.6 million worth. These transactions are interesting, as aggregate 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 Fulton Financial Corp (NASDAQ:FULT) but similarly valued. These stocks are Cathay General Bancorp (NASDAQ:CATY), Immunomedics, Inc. (NASDAQ:IMMU), J&J Snack Foods Corp. (NASDAQ:JJSF), and Stag Industrial Inc (NYSE:STAG). This group of stocks’ market caps match FULT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CATY | 14 | 47562 | 1 |
| IMMU | 28 | 680283 | -2 |
| JJSF | 10 | 81856 | 0 |
| STAG | 12 | 115201 | 1 |
| Average | 16 | 231226 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $231 million. That figure was $12 million in FULT’s case. Immunomedics, Inc. (NASDAQ:IMMU) is the most popular stock in this table. On the other hand J&J Snack Foods Corp. (NASDAQ:JJSF) is the least popular one with only 10 bullish hedge fund positions. Fulton Financial Corp (NASDAQ:FULT) is not the least popular stock in this group but hedge fund interest is still below average. 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately FULT wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); FULT investors were disappointed as the stock returned 7% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
