We can judge whether NBT Bancorp Inc. (NASDAQ:NBTB) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
NBT Bancorp Inc. (NASDAQ:NBTB) has experienced an increase in activity from the world's largest hedge funds lately. NBTB was in 8 hedge funds' portfolios at the end of June. There were 6 hedge funds in our database with NBTB positions at the end of the previous quarter. Our calculations also showed that NBTB 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
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. Let's go over the new hedge fund action encompassing NBT Bancorp Inc. (NASDAQ:NBTB).
What does smart money think about NBT Bancorp Inc. (NASDAQ:NBTB)?
At the end of the second quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the previous quarter. By comparison, 9 hedge funds held shares or bullish call options in NBTB 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.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the number one position in NBT Bancorp Inc. (NASDAQ:NBTB), worth close to $3.7 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by Israel Englander of Millennium Management, with a $3.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers with similar optimism encompass Cliff Asness's AQR Capital Management, Ken Griffin's Citadel Investment Group and Peter Muller's PDT Partners.
As aggregate interest increased, some big names have jumped into NBT Bancorp Inc. (NASDAQ:NBTB) headfirst. ExodusPoint Capital, managed by Michael Gelband, initiated the most valuable position in NBT Bancorp Inc. (NASDAQ:NBTB). ExodusPoint Capital had $0.4 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also initiated a $0.2 million position during the quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as NBT Bancorp Inc. (NASDAQ:NBTB) but similarly valued. These stocks are Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), Evoqua Water Technologies Corp. (NYSE:AQUA), SunPower Corporation (NASDAQ:SPWR), and NOW Inc (NYSE:DNOW). This group of stocks' market values match NBTB's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APLS,17,341186,-2 AQUA,13,116842,0 SPWR,10,72363,1 DNOW,11,87977,-3 Average,12.75,154592,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $155 million. That figure was $10 million in NBTB's case. Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) is the most popular stock in this table. On the other hand SunPower Corporation (NASDAQ:SPWR) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks NBT Bancorp Inc. (NASDAQ:NBTB) is even less popular than SPWR. Hedge funds dodged a bullet by taking a bearish stance towards NBTB. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately NBTB wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); NBTB investors were disappointed as the stock returned -1.7% during the third 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.