Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Bank of N.T. Butterfield & Son Limited (The) (NYSE:NTB).
Bank of N.T. Butterfield & Son Limited (The) (NYSE:NTB) investors should be aware of an increase in hedge fund interest in recent months. NTB was in 17 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 15 hedge funds in our database with NTB holdings at the end of the previous quarter. Our calculations also showed that NTB isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s analyze the latest hedge fund action encompassing Bank of N.T. Butterfield & Son Limited (The) (NYSE:NTB).
How are hedge funds trading Bank of N.T. Butterfield & Son Limited (The) (NYSE:NTB)?
At the end of the fourth quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NTB over the last 18 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
More specifically, Southpoint Capital Advisors was the largest shareholder of Bank of N.T. Butterfield & Son Limited (The) (NYSE:NTB), with a stake worth $74 million reported as of the end of September. Trailing Southpoint Capital Advisors was Royce & Associates, which amassed a stake valued at $15.3 million. Two Sigma Advisors, Adage Capital Management, and D E Shaw 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 Southpoint Capital Advisors allocated the biggest weight to Bank of N.T. Butterfield & Son Limited (The) (NYSE:NTB), around 2.67% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, dishing out 0.67 percent of its 13F equity portfolio to NTB.
As one would reasonably expect, specific money managers have jumped into Bank of N.T. Butterfield & Son Limited (The) (NYSE:NTB) headfirst. Adage Capital Management, managed by Phill Gross and Robert Atchinson, initiated the biggest position in Bank of N.T. Butterfield & Son Limited (The) (NYSE:NTB). Adage Capital Management had $9.6 million invested in the company at the end of the quarter. Harry Gail’s Harspring Capital Management also made a $0.7 million investment in the stock during the quarter. The following funds were also among the new NTB investors: Paul Tudor Jones’s Tudor Investment Corp and Thomas Bailard’s Bailard Inc.
Let’s check out hedge fund activity in other stocks similar to Bank of N.T. Butterfield & Son Limited (The) (NYSE:NTB). We will take a look at Cardtronics plc (NASDAQ:CATM), Adient plc (NYSE:ADNT), Cubic Corporation (NYSE:CUB), and Vector Group Ltd (NYSE:VGR). This group of stocks’ market values match NTB’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CATM | 22 | 554249 | 1 |
| ADNT | 36 | 521141 | 9 |
| CUB | 19 | 43685 | 2 |
| VGR | 17 | 203826 | -2 |
| Average | 23.5 | 330725 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $331 million. That figure was $149 million in NTB’s case. Adient plc (NYSE:ADNT) is the most popular stock in this table. On the other hand Vector Group Ltd (NYSE:VGR) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Bank of N.T. Butterfield & Son Limited (The) (NYSE:NTB) is even less popular than VGR. Hedge funds dodged a bullet by taking a bearish stance towards NTB. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately NTB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); NTB investors were disappointed as the stock returned -52.7% during the same time period 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 most of these stocks already outperformed the market so far in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
