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In this article you are going to find out whether hedge funds think Farmers National Banc Corp (NASDAQ:FMNB) 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.
Hedge fund interest in Farmers National Banc Corp (NASDAQ:FMNB) 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 SiTime Corporation (NASDAQ:SITM), Allot Ltd. (NASDAQ:ALLT), and Consolidated Communications Holdings Inc (NASDAQ:CNSL) to gather more data points. Our calculations also showed that FMNB isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
To most market participants, hedge funds are assumed to be unimportant, outdated investment tools of yesteryear. While there are over 8000 funds trading at the moment, We look at the aristocrats of this group, approximately 850 funds. It is estimated that this group of investors handle most of the hedge fund industry's total capital, and by observing their inimitable equity investments, Insider Monkey has discovered a few investment strategies that have historically beaten Mr. Market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
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Fred Cummings of Elizabeth Park Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's review the latest hedge fund action encompassing Farmers National Banc Corp (NASDAQ:FMNB).
What have hedge funds been doing with Farmers National Banc Corp (NASDAQ:FMNB)?
At Q1's end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FMNB over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Farmers National Banc Corp (NASDAQ:FMNB), which was worth $5.1 million at the end of the third quarter. On the second spot was Elizabeth Park Capital Management which amassed $4.4 million worth of shares. Two Sigma Advisors, Arrowstreet Capital, and Citadel Investment Group 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 Elizabeth Park Capital Management allocated the biggest weight to Farmers National Banc Corp (NASDAQ:FMNB), around 3.34% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, setting aside 0.4 percent of its 13F equity portfolio to FMNB.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: D E Shaw. 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 PDT Partners).
Let's go over 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 SiTime Corporation (NASDAQ:SITM), Allot Ltd. (NASDAQ:ALLT), Consolidated Communications Holdings Inc (NASDAQ:CNSL), and Camtek LTD. (NASDAQ:CAMT). 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 SITM,3,12026,-1 ALLT,13,107352,3 CNSL,15,16767,-1 CAMT,6,21349,-3 Average,9.25,39374,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $15 million in FMNB's case. Consolidated Communications Holdings Inc (NASDAQ:CNSL) is the most popular stock in this table. On the other hand SiTime Corporation (NASDAQ:SITM) is the least popular one with only 3 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. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately FMNB wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); FMNB investors were disappointed as the stock returned 4.2% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.