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Hedge Fund Sentiment Is Stagnant On Byline Bancorp, Inc. (BY)

Nina Todic

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Byline Bancorp, Inc. (NYSE:BY).

Hedge fund interest in Byline Bancorp, Inc. (NYSE:BY) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as P.H. Glatfelter Company (NYSE:GLT), New Gold Inc. (NYSE:NGD), and Nabors Industries Ltd. (NYSE:NBR) to gather more data points. Our calculations also showed that BY isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Today there are dozens of formulas stock market investors have at their disposal to value publicly traded companies. A couple of the less utilized formulas are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the top money managers can outclass their index-focused peers by a very impressive margin (see the details here).

[caption id="attachment_673876" align="aligncenter" width="473"] John Overdeck of Two Sigma Advisors[/caption]

John Overdeck of Two Sigma

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind we're going to view the recent hedge fund action regarding Byline Bancorp, Inc. (NYSE:BY).

What have hedge funds been doing with Byline Bancorp, Inc. (NYSE:BY)?

Heading into the fourth quarter of 2019, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 4 hedge funds held shares or bullish call options in BY a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey's hedge fund database, Mendon Capital Advisors, managed by Anton Schutz, holds the biggest position in Byline Bancorp, Inc. (NYSE:BY). Mendon Capital Advisors has a $12.2 million position in the stock, comprising 2.1% of its 13F portfolio. On Mendon Capital Advisors's heels is Renaissance Technologies holding a $3.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that are bullish contain Israel Englander's Millennium Management, John Overdeck and David Siegel's Two Sigma Advisors and Michael Gelband's ExodusPoint Capital. In terms of the portfolio weights assigned to each position Mendon Capital Advisors allocated the biggest weight to Byline Bancorp, Inc. (NYSE:BY), around 2.06% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to BY.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. 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 only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was ExodusPoint Capital).

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Byline Bancorp, Inc. (NYSE:BY) but similarly valued. We will take a look at P.H. Glatfelter Company (NYSE:GLT), New Gold Inc. (NYSE:NGD), Nabors Industries Ltd. (NYSE:NBR), and Golar LNG Partners LP (NASDAQ:GMLP). All of these stocks' market caps are similar to BY's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GLT,9,15614,3 NGD,14,85429,1 NBR,20,89531,-2 GMLP,4,36061,-2 Average,11.75,56659,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $20 million in BY's case. Nabors Industries Ltd. (NYSE:NBR) is the most popular stock in this table. On the other hand Golar LNG Partners LP (NASDAQ:GMLP) is the least popular one with only 4 bullish hedge fund positions. Byline Bancorp, Inc. (NYSE:BY) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BY wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BY investors were disappointed as the stock returned 2.9% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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

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