Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Republic First Bancorp, Inc. (NASDAQ:FRBK) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of June. At the end of this article we will also compare FRBK to other stocks including Concert Pharmaceuticals Inc (NASDAQ:CNCE), CASI Pharmaceuticals Inc (NASDAQ:CASI), and Hydrogenics Corporation (NASDAQ:HYGS) to get a better sense of its popularity. Our calculations also showed that FRBK 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.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely 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. Let’s analyze the recent hedge fund action surrounding Republic First Bancorp, Inc. (NASDAQ:FRBK).
How have hedgies been trading Republic First Bancorp, Inc. (NASDAQ:FRBK)?
Heading into the third quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in FRBK a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among these funds, Basswood Capital held the most valuable stake in Republic First Bancorp, Inc. (NASDAQ:FRBK), which was worth $2.3 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $2 million worth of shares. Moreover, Citadel Investment Group, D E Shaw, and AQR Capital Management were also bullish on Republic First Bancorp, Inc. (NASDAQ:FRBK), allocating a large percentage of their portfolios to this stock.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Springbok Capital).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Republic First Bancorp, Inc. (NASDAQ:FRBK) but similarly valued. These stocks are Concert Pharmaceuticals Inc (NASDAQ:CNCE), CASI Pharmaceuticals Inc (NASDAQ:CASI), Hydrogenics Corporation (NASDAQ:HYGS), and Landec Corporation (NASDAQ:LNDC). This group of stocks’ market caps match FRBK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CNCE | 13 | 69573 | 1 |
| CASI | 1 | 122 | -3 |
| HYGS | 7 | 3311 | 4 |
| LNDC | 11 | 33094 | 3 |
| Average | 8 | 26525 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $5 million in FRBK’s case. Concert Pharmaceuticals Inc (NASDAQ:CNCE) is the most popular stock in this table. On the other hand CASI Pharmaceuticals Inc (NASDAQ:CASI) is the least popular one with only 1 bullish hedge fund positions. Republic First Bancorp, Inc. (NASDAQ:FRBK) 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 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 FRBK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FRBK investors were disappointed as the stock returned -14.5% 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 in 2019.
Disclosure: None. This article was originally published at Insider Monkey.