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Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Farmers National Banc Corp (NASDAQ:FMNB).
Is FMNB a good stock to buy now? Farmers National Banc Corp (NASDAQ:FMNB) has seen an increase in hedge fund interest in recent months. Farmers National Banc Corp (NASDAQ:FMNB) was in 9 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 9. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 8 hedge funds in our database with FMNB positions at the end of the second quarter. Our calculations also showed that FMNB 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ian Wace of Marshall Wace
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 we're going to analyze the recent hedge fund action regarding Farmers National Banc Corp (NASDAQ:FMNB).
Do Hedge Funds Think FMNB Is A Good Stock To Buy Now?
At third quarter's end, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in FMNB 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, Renaissance Technologies was the largest shareholder of Farmers National Banc Corp (NASDAQ:FMNB), with a stake worth $3.9 million reported as of the end of September. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $1.5 million. Two Sigma Advisors, Winton Capital Management, and Marshall Wace LLP 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 Winton Capital Management allocated the biggest weight to Farmers National Banc Corp (NASDAQ:FMNB), around 0.02% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to FMNB.
As industrywide interest jumped, key money managers have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the most valuable position in Farmers National Banc Corp (NASDAQ:FMNB). Marshall Wace LLP had $0.3 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also initiated a $0.2 million position during the quarter. The other funds with brand new FMNB positions are Israel Englander's Millennium Management and D. E. Shaw's D E Shaw.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Farmers National Banc Corp (NASDAQ:FMNB) but similarly valued. These stocks are Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX), CytomX Therapeutics, Inc. (NASDAQ:CTMX), Hooker Furniture Corporation (NASDAQ:HOFT), Americas Gold and Silver Corporation (NYSE:USAS), OneWater Marine Inc. (NASDAQ:ONEW), Del Taco Restaurants Inc (NASDAQ:TACO), and Ares Commercial Real Estate Corp (NYSE:ACRE). This group of stocks' market valuations match FMNB's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CPRX,17,57604,-5 CTMX,20,74703,-2 HOFT,10,84583,2 USAS,4,6087,-2 ONEW,11,38634,6 TACO,15,21195,3 ACRE,9,24591,-1 Average,12.3,43914,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.3 hedge funds with bullish positions and the average amount invested in these stocks was $44 million. That figure was $8 million in FMNB's case. CytomX Therapeutics, Inc. (NASDAQ:CTMX) is the most popular stock in this table. On the other hand Americas Gold and Silver Corporation (NYSE:USAS) is the least popular one with only 4 bullish hedge fund positions. Farmers National Banc Corp (NASDAQ:FMNB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FMNB is 51.6. 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 FMNB as the stock returned 24.4% 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.