Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 24.4% during the first 9 months of 2019 and outperformed the broader market benchmark by 4 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Sandy Spring Bancorp Inc. (NASDAQ:SASR) has seen an increase in activity from the world's largest hedge funds recently. Our calculations also showed that SASR 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.
In today’s marketplace there are numerous signals shareholders employ to appraise publicly traded companies. Two of the most underrated signals are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the elite money managers can outpace the market by a very impressive amount (see the details here).
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 take a gander at the recent hedge fund action regarding Sandy Spring Bancorp Inc. (NASDAQ:SASR).
What does smart money think about Sandy Spring Bancorp Inc. (NASDAQ:SASR)?
At the end of the second quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the first quarter of 2019. On the other hand, there were a total of 13 hedge funds with a bullish position in SASR a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
The largest stake in Sandy Spring Bancorp Inc. (NASDAQ:SASR) was held by Renaissance Technologies, which reported holding $36.7 million worth of stock at the end of March. It was followed by Forest Hill Capital with a $12.7 million position. Other investors bullish on the company included Arrowstreet Capital, Millennium Management, and EJF Capital.
Consequently, key money managers have jumped into Sandy Spring Bancorp Inc. (NASDAQ:SASR) headfirst. Algert Coldiron Investors, managed by Peter Algert and Kevin Coldiron, established the most valuable position in Sandy Spring Bancorp Inc. (NASDAQ:SASR). Algert Coldiron Investors had $1.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also initiated a $0.8 million position during the quarter. The following funds were also among the new SASR investors: John Overdeck and David Siegel's Two Sigma Advisors and Chuck Royce's Royce & Associates.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Sandy Spring Bancorp Inc. (NASDAQ:SASR) but similarly valued. These stocks are United Fire Group, Inc. (NASDAQ:UFCS), Tompkins Financial Corporation (NYSE:TMP), Safehold Inc. (NYSE:SAFE), and Corcept Therapeutics Incorporated (NASDAQ:CORT). This group of stocks' market values are closest to SASR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UFCS,10,17181,0 TMP,5,20068,0 SAFE,3,3970,2 CORT,17,123655,-1 Average,8.75,41219,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $84 million in SASR's case. Corcept Therapeutics Incorporated (NASDAQ:CORT) is the most popular stock in this table. On the other hand Safehold Inc. (NYSE:SAFE) is the least popular one with only 3 bullish hedge fund positions. Sandy Spring Bancorp Inc. (NASDAQ:SASR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately SASR wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SASR were disappointed as the stock returned -2.5% 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 this year.
Disclosure: None. This article was originally published at Insider Monkey.