In this article we will check out the progression of hedge fund sentiment towards Signature Bank (NASDAQ:SBNY) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is SBNY a good stock to buy now? Money managers were taking an optimistic view. The number of long hedge fund bets advanced by 11 in recent months. Signature Bank (NASDAQ:SBNY) was in 35 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 36. Our calculations also showed that SBNY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 24 hedge funds in our database with SBNY positions at the end of the second quarter.
Video: 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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.
Matthew Lindenbaum of Basswood Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind we’re going to view the new hedge fund action regarding Signature Bank (NASDAQ:SBNY).
Do Hedge Funds Think SBNY Is A Good Stock To Buy Now?
At Q3’s end, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 46% from the second quarter of 2020. By comparison, 36 hedge funds held shares or bullish call options in SBNY a year ago. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Signature Bank (NASDAQ:SBNY), with a stake worth $106 million reported as of the end of September. Trailing Citadel Investment Group was First Pacific Advisors LLC, which amassed a stake valued at $68.3 million. Basswood Capital, Arrowstreet Capital, and Renaissance Technologies 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 Elizabeth Park Capital Management allocated the biggest weight to Signature Bank (NASDAQ:SBNY), around 2.8% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, earmarking 2.27 percent of its 13F equity portfolio to SBNY.
Consequently, key money managers were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the largest position in Signature Bank (NASDAQ:SBNY). Arrowstreet Capital had $24.5 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $21.8 million position during the quarter. The following funds were also among the new SBNY investors: Nathaniel August’s Mangrove Partners, Greg Eisner’s Engineers Gate Manager, and D. E. Shaw’s D E Shaw.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Signature Bank (NASDAQ:SBNY) but similarly valued. We will take a look at Virtu Financial Inc (NASDAQ:VIRT), Haemonetics Corporation (NYSE:HAE), Change Healthcare Inc. (NASDAQ:CHNG), Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR), Douglas Emmett, Inc. (NYSE:DEI), Schneider National, Inc. (NYSE:SNDR), and Jamf Holding Corp. (NASDAQ:JAMF). This group of stocks’ market caps resemble SBNY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VIRT | 26 | 264490 | -2 |
| HAE | 32 | 645632 | -7 |
| CHNG | 49 | 1360900 | 2 |
| ARWR | 22 | 189480 | 1 |
| DEI | 24 | 591201 | -3 |
| SNDR | 15 | 142116 | -2 |
| JAMF | 15 | 175008 | 15 |
| Average | 26.1 | 481261 | 0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.1 hedge funds with bullish positions and the average amount invested in these stocks was $481 million. That figure was $344 million in SBNY’s case. Change Healthcare Inc. (NASDAQ:CHNG) is the most popular stock in this table. On the other hand Schneider National, Inc. (NYSE:SNDR) is the least popular one with only 15 bullish hedge fund positions. Signature Bank (NASDAQ:SBNY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SBNY is 68.6. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on SBNY as the stock returned 59.1% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Signature Bank New York N Y (NASDAQ:SBNY)
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Disclosure: None. This article was originally published at Insider Monkey.
