In this article we will take a look at whether hedge funds think First Republic Bank (NYSE:FRC) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
First Republic Bank (NYSE:FRC) has experienced an increase in hedge fund interest of late. Our calculations also showed that FRC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are several metrics stock market investors have at their disposal to analyze publicly traded companies. A couple of the most underrated metrics are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the top money managers can outpace the broader indices by a superb amount (see the details here).
Ric Dillon of Diamond Hill Capital
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 these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s analyze the recent hedge fund action surrounding First Republic Bank (NYSE:FRC).
How have hedgies been trading First Republic Bank (NYSE:FRC)?
At Q1’s end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the previous quarter. By comparison, 18 hedge funds held shares or bullish call options in FRC a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Robert Joseph Caruso’s Select Equity Group has the most valuable position in First Republic Bank (NYSE:FRC), worth close to $433.9 million, comprising 3% of its total 13F portfolio. On Select Equity Group’s heels is Ric Dillon of Diamond Hill Capital, with a $227.4 million position; 1.5% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish encompass Ken Griffin’s Citadel Investment Group, Dmitry Balyasny’s Balyasny Asset Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Select Equity Group allocated the biggest weight to First Republic Bank (NYSE:FRC), around 2.99% of its 13F portfolio. Diamond Hill Capital is also relatively very bullish on the stock, setting aside 1.54 percent of its 13F equity portfolio to FRC.
As industrywide interest jumped, key money managers were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the most valuable position in First Republic Bank (NYSE:FRC). Balyasny Asset Management had $24.5 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also made a $2 million investment in the stock during the quarter. The following funds were also among the new FRC investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Peter Seuss’s Prana Capital Management, and Donald Sussman’s Paloma Partners.
Let’s go over hedge fund activity in other stocks similar to First Republic Bank (NYSE:FRC). These stocks are Altice USA, Inc. (NYSE:ATUS), Cardinal Health, Inc. (NYSE:CAH), Campbell Soup Company (NYSE:CPB), and Trip.com Group Limited (NASDAQ:TCOM). This group of stocks’ market values match FRC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ATUS | 47 | 2396363 | -7 |
| CAH | 44 | 792889 | 10 |
| CPB | 40 | 378469 | 11 |
| TCOM | 31 | 966859 | 0 |
| Average | 40.5 | 1133645 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.5 hedge funds with bullish positions and the average amount invested in these stocks was $1134 million. That figure was $916 million in FRC’s case. Altice USA, Inc. (NYSE:ATUS) is the most popular stock in this table. On the other hand Trip.com Group Limited (NASDAQ:TCOM) is the least popular one with only 31 bullish hedge fund positions. Compared to these stocks First Republic Bank (NYSE:FRC) is even less popular than TCOM. Hedge funds clearly dropped the ball on FRC as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on FRC as the stock returned 31.7% so far in the second quarter and outperformed the market by an even larger margin.
Follow First Republic Bank S F New (NYSE:FRC)
Follow First Republic Bank S F New (NYSE:FRC)
Disclosure: None. This article was originally published at Insider Monkey.
