Should I Avoid First Community Bancshares Inc (FCBC)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 866 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st. In this article we look at what those investors think of First Community Bancshares Inc (NASDAQ:FCBC).

Is First Community Bancshares Inc (NASDAQ:FCBC) undervalued? Prominent investors were reducing their bets on the stock. The number of bullish hedge fund bets decreased by 1 in recent months. First Community Bancshares Inc (NASDAQ:FCBC) was in 5 hedge funds’ portfolios at the end of March. The all time high for this statistic is 9. Our calculations also showed that FCBC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Ken Fisher of Fisher Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we’re going to take a look at the key hedge fund action encompassing First Community Bancshares Inc (NASDAQ:FCBC).

Do Hedge Funds Think FCBC Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards FCBC over the last 23 quarters. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in First Community Bancshares Inc (NASDAQ:FCBC), which was worth $5.5 million at the end of the fourth quarter. On the second spot was Two Sigma Advisors which amassed $0.9 million worth of shares. D E Shaw, Citadel Investment Group, and Fisher Asset Management 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 Renaissance Technologies allocated the biggest weight to First Community Bancshares Inc (NASDAQ:FCBC), around 0.01% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, dishing out 0.0024 percent of its 13F equity portfolio to FCBC.

Because First Community Bancshares Inc (NASDAQ:FCBC) has faced a decline in interest from hedge fund managers, it’s safe to say that there exists a select few money managers that elected to cut their positions entirely heading into Q2. Interestingly, Israel Englander’s Millennium Management dumped the largest stake of all the hedgies tracked by Insider Monkey, totaling an estimated $0.5 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund said goodbye to about $0.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 funds heading into Q2.

Let’s also examine hedge fund activity in other stocks similar to First Community Bancshares Inc (NASDAQ:FCBC). These stocks are Mercantile Bank Corp. (NASDAQ:MBWM), AVROBIO, Inc. (NASDAQ:AVRO), Miller Industries, Inc. (NYSE:MLR), Terns Pharmaceuticals, Inc. (NASDAQ:TERN), Avadel Pharmaceuticals plc (NASDAQ:AVDL), Altimmune, Inc. (NASDAQ:ALT), and NetSTREIT Corp. (NYSE:NTST). This group of stocks’ market valuations are similar to FCBC’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.9 hedge funds with bullish positions and the average amount invested in these stocks was $117 million. That figure was $8 million in FCBC’s case. Avadel Pharmaceuticals plc (NASDAQ:AVDL) is the most popular stock in this table. On the other hand Mercantile Bank Corp. (NASDAQ:MBWM) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks First Community Bancshares Inc (NASDAQ:FCBC) is even less popular than MBWM. Our overall hedge fund sentiment score for FCBC is 20.7. 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. Hedge funds dodged a bullet by taking a bearish stance towards FCBC. Our calculations showed that the top 10 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th but managed to beat the market again by 6.1 percentage points. Unfortunately FCBC wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); FCBC investors were disappointed as the stock returned -1.3% since the end of the first quarter (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

Disclosure: None. This article was originally published at Insider Monkey.