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Should You Avoid First Citizens BancShares Inc. (FCNCA)?

Nina Todic

Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients' money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space. Nevertheless, it is also possible to identify cheap large cap stocks by following the footsteps of best performing hedge funds.

Is First Citizens BancShares Inc. (NASDAQ:FCNCA) going to take off soon? Investors who are in the know are becoming less confident. The number of long hedge fund positions were trimmed by 1 in recent months. Our calculations also showed that FCNCA isn't among the 30 most popular stocks among hedge funds.

Today there are tons of signals shareholders can use to value stocks. A duo of the less known signals are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the best investment managers can outclass the market by a significant amount (see the details here).

Joe Huber - Huber Capital Management

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's view the latest hedge fund action regarding First Citizens BancShares Inc. (NASDAQ:FCNCA).

What have hedge funds been doing with First Citizens BancShares Inc. (NASDAQ:FCNCA)?

Heading into the third quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in FCNCA a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

No of Hedge Funds with FCNCA Positions

Among these funds, Royce & Associates held the most valuable stake in First Citizens BancShares Inc. (NASDAQ:FCNCA), which was worth $56.8 million at the end of the second quarter. On the second spot was AQR Capital Management which amassed $23.7 million worth of shares. Moreover, Renaissance Technologies, Huber Capital Management, and Arrowstreet Capital were also bullish on First Citizens BancShares Inc. (NASDAQ:FCNCA), allocating a large percentage of their portfolios to this stock.

Because First Citizens BancShares Inc. (NASDAQ:FCNCA) has witnessed a decline in interest from the smart money, it's safe to say that there was a specific group of money managers who were dropping their entire stakes last quarter. It's worth mentioning that David Costen Haley's HBK Investments cut the biggest stake of all the hedgies followed by Insider Monkey, comprising about $0.7 million in stock, and Thomas Bailard's Bailard Inc was right behind this move, as the fund dropped about $0.4 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 1 funds last quarter.

Let's go over hedge fund activity in other stocks similar to First Citizens BancShares Inc. (NASDAQ:FCNCA). These stocks are MDU Resources Group Inc (NYSE:MDU), Entegris Inc (NASDAQ:ENTG), Leggett & Platt, Incorporated  (NYSE:LEG), and SYNNEX Corporation (NYSE:SNX). All of these stocks' market caps match FCNCA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MDU,21,307440,3 ENTG,24,567258,2 LEG,9,29678,-1 SNX,18,213287,7 Average,18,279416,2.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $279 million. That figure was $145 million in FCNCA's case. Entegris Inc (NASDAQ:ENTG) is the most popular stock in this table. On the other hand Leggett & Platt, Incorporated (NYSE:LEG) is the least popular one with only 9 bullish hedge fund positions. First Citizens BancShares Inc. (NASDAQ:FCNCA) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks (view the video below) among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on FCNCA, though not to the same extent, as the stock returned 4.8% during the third quarter and outperformed the market. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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