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In this article you are going to find out whether hedge funds think FB Financial Corporation (NYSE:FBK) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is FBK a good stock to buy now? Money managers were becoming less confident. The number of bullish hedge fund positions were cut by 3 in recent months. FB Financial Corporation (NYSE:FBK) was in 9 hedge funds' portfolios at the end of September. The all time high for this statistics is 12. Our calculations also showed that FBK isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Anton Schutz of Mendon Capital Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind let's take a glance at the new hedge fund action encompassing FB Financial Corporation (NYSE:FBK).
Do Hedge Funds Think FBK Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in FBK a year ago. With the smart money's capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in FB Financial Corporation (NYSE:FBK) was held by Cardinal Capital, which reported holding $25.8 million worth of stock at the end of September. It was followed by Mendon Capital Advisors with a $7.9 million position. Other investors bullish on the company included Arrowstreet Capital, JCSD Capital, and EJF Capital. In terms of the portfolio weights assigned to each position Mendon Capital Advisors allocated the biggest weight to FB Financial Corporation (NYSE:FBK), around 4.62% of its 13F portfolio. JCSD Capital is also relatively very bullish on the stock, designating 3.99 percent of its 13F equity portfolio to FBK.
Judging by the fact that FB Financial Corporation (NYSE:FBK) has faced a decline in interest from the aggregate hedge fund industry, it's safe to say that there were a few hedgies who were dropping their positions entirely in the third quarter. At the top of the heap, Israel Englander's Millennium Management sold off the largest position of the 750 funds tracked by Insider Monkey, comprising close to $4 million in stock. Donald Sussman's fund, Paloma Partners, also dumped its stock, about $0.6 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 3 funds in the third quarter.
Let's go over hedge fund activity in other stocks similar to FB Financial Corporation (NYSE:FBK). These stocks are Stewart Information Services Corp (NYSE:STC), Helios Technologies, Inc. (NASDAQ:HLIO), Intellia Therapeutics, Inc. (NASDAQ:NTLA), Sixth Street Specialty Lending Inc (NYSE:TSLX), Bitauto Hldg Ltd (NYSE:BITA), Steelcase Inc. (NYSE:SCS), and NuStar Energy L.P. (NYSE:NS). All of these stocks' market caps are closest to FBK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STC,19,103657,4 HLIO,8,55418,-1 NTLA,15,62356,-2 TSLX,11,75906,1 BITA,16,158755,0 SCS,22,93278,0 NS,4,8446,-1 Average,13.6,79688,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.6 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $50 million in FBK's case. Steelcase Inc. (NYSE:SCS) is the most popular stock in this table. On the other hand NuStar Energy L.P. (NYSE:NS) is the least popular one with only 4 bullish hedge fund positions. FB Financial Corporation (NYSE:FBK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FBK is 38.4. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on FBK as the stock returned 35.6% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.