World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
FB Financial Corporation (NYSE:FBK) has seen a decrease in hedge fund sentiment lately. Our calculations also showed that FBK isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, 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. We're going to take a look at the recent hedge fund action regarding FB Financial Corporation (NYSE:FBK).
What have hedge funds been doing with FB Financial Corporation (NYSE:FBK)?
Heading into the third quarter of 2019, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in FBK over the last 16 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Anton Schutz's Mendon Capital Advisors has the biggest position in FB Financial Corporation (NYSE:FBK), worth close to $55.3 million, amounting to 8.7% of its total 13F portfolio. On Mendon Capital Advisors's heels is Cardinal Capital, led by Amy Minella, holding a $30.2 million position; 1% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions include Renaissance Technologies, Ken Griffin's Citadel Investment Group and .
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Forest Hill Capital. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified FBK as a viable investment and initiated a position in the stock.
Let's also examine hedge fund activity in other stocks similar to FB Financial Corporation (NYSE:FBK). These stocks are Wesco Aircraft Holdings Inc (NYSE:WAIR), Boise Cascade Company (NYSE:BCC), Enterprise Financial Services Corp (NASDAQ:EFSC), and Teekay LNG Partners L.P. (NYSE:TGP). This group of stocks' market valuations are closest to FBK's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WAIR,21,252203,-1 BCC,11,50811,-2 EFSC,13,52710,-2 TGP,9,43758,1 Average,13.5,99871,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $89 million in FBK's case. Wesco Aircraft Holdings Inc (NYSE:WAIR) is the most popular stock in this table. On the other hand Teekay LNG Partners L.P. (NYSE:TGP) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks FB Financial Corporation (NYSE:FBK) is even less popular than TGP. Our calculations showed that top 20 most popular stocks 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 FBK, though not to the same extent, as the stock returned 2.8% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.