As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Valley National Bancorp (NASDAQ:VLY).
Hedge fund interest in Valley National Bancorp (NASDAQ:VLY) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that VLY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare VLY to other stocks including Q2 Holdings Inc (NYSE:QTWO), Alliance Data Systems Corporation (NYSE:ADS), and Alteryx, Inc. (NYSE:AYX) to get a better sense of its popularity.
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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
Fred Cummings of Elizabeth Park Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. Now we’re going to take a look at the recent hedge fund action encompassing Valley National Bancorp (NASDAQ:VLY).
Do Hedge Funds Think VLY Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2020. On the other hand, there were a total of 22 hedge funds with a bullish position in VLY 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.
More specifically, Royce & Associates was the largest shareholder of Valley National Bancorp (NASDAQ:VLY), with a stake worth $22.4 million reported as of the end of March. Trailing Royce & Associates was Holocene Advisors, which amassed a stake valued at $17.9 million. AQR Capital Management, Elizabeth Park Capital Management, and Millennium 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 Elizabeth Park Capital Management allocated the biggest weight to Valley National Bancorp (NASDAQ:VLY), around 2.52% of its 13F portfolio. Hourglass Capital is also relatively very bullish on the stock, dishing out 1.37 percent of its 13F equity portfolio to VLY.
Because Valley National Bancorp (NASDAQ:VLY) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there were a few hedge funds that decided to sell off their positions entirely by the end of the first quarter. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the biggest investment of the 750 funds tracked by Insider Monkey, comprising about $4 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund said goodbye to about $0.9 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Valley National Bancorp (NASDAQ:VLY) but similarly valued. These stocks are Q2 Holdings Inc (NYSE:QTWO), Alliance Data Systems Corporation (NYSE:ADS), Alteryx, Inc. (NYSE:AYX), Iridium Communications Inc. (NASDAQ:IRDM), Tenet Healthcare Corp (NYSE:THC), Evercore Inc. (NYSE:EVR), and Nextera Energy Partners LP (NYSE:NEP). This group of stocks’ market valuations resemble VLY’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| QTWO | 26 | 248123 | 3 |
| ADS | 36 | 1420743 | 4 |
| AYX | 35 | 749927 | -7 |
| IRDM | 22 | 605499 | 4 |
| THC | 39 | 1515145 | 5 |
| EVR | 31 | 365300 | 3 |
| NEP | 17 | 175587 | -15 |
| Average | 29.4 | 725761 | -0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.4 hedge funds with bullish positions and the average amount invested in these stocks was $726 million. That figure was $88 million in VLY’s case. Tenet Healthcare Corp (NYSE:THC) is the most popular stock in this table. On the other hand Nextera Energy Partners LP (NYSE:NEP) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Valley National Bancorp (NASDAQ:VLY) is even less popular than NEP. Our overall hedge fund sentiment score for VLY is 26.3. 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 VLY. 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 28.5% in 2021 through July 23rd but managed to beat the market again by 10.1 percentage points. Unfortunately VLY wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); VLY investors were disappointed as the stock returned -5.8% since the end of the first quarter (through 7/23) 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.
Follow Valley National Bancorp (NYSE:VLY)
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Disclosure: None. This article was originally published at Insider Monkey.
