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Hedge Funds Are Nibbling On Sterling Bancorp (STL)

·6 min read

We at Insider Monkey have gone over 866 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st. In this article, we look at what those funds think of Sterling Bancorp (NYSE:STL) based on that data.

Sterling Bancorp (NYSE:STL) investors should pay attention to an increase in hedge fund interest recently. Sterling Bancorp (NYSE:STL) was in 20 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 30. There were 19 hedge funds in our database with STL positions at the end of the fourth quarter. Our calculations also showed that STL isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Matthew Lindenbaum Basswood Capital
Matthew Lindenbaum Basswood Capital

Matthew Lindenbaum of Basswood Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let's take a glance at the new hedge fund action regarding Sterling Bancorp (NYSE:STL).

Do Hedge Funds Think STL Is A Good Stock To Buy Now?

At the end of March, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards STL over the last 23 quarters. With hedge funds' capital changing hands, there exists a few notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

Among these funds, Diamond Hill Capital held the most valuable stake in Sterling Bancorp (NYSE:STL), which was worth $184.2 million at the end of the fourth quarter. On the second spot was Basswood Capital which amassed $47.2 million worth of shares. GAMCO Investors, D E Shaw, and Azora Capital 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 Azora Capital allocated the biggest weight to Sterling Bancorp (NYSE:STL), around 2.28% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, earmarking 2.13 percent of its 13F equity portfolio to STL.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls' herd. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the most valuable position in Sterling Bancorp (NYSE:STL). Balyasny Asset Management had $12.9 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also made a $0.6 million investment in the stock during the quarter. The following funds were also among the new STL investors: Karim Abbadi and Edward McBride's Centiva Capital, Mika Toikka's AlphaCrest Capital Management, and Ken Griffin's Citadel Investment Group.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Sterling Bancorp (NYSE:STL) but similarly valued. These stocks are Rayonier Inc. (NYSE:RYN), DigitalOcean Holdings, Inc. (NYSE:DOCN), Diversey Holdings, Ltd. (NASDAQ:DSEY), Schneider National, Inc. (NYSE:SNDR), Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN), Sunnova Energy International Inc. (NYSE:NOVA), and Ormat Technologies, Inc. (NYSE:ORA). All of these stocks' market caps resemble STL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RYN,18,428689,2 DOCN,22,197674,22 DSEY,21,284464,21 SNDR,19,127648,-1 BHVN,33,359789,-6 NOVA,26,327923,-6 ORA,17,251963,1 Average,22.3,282593,4.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.3 hedge funds with bullish positions and the average amount invested in these stocks was $283 million. That figure was $344 million in STL's case. Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) is the most popular stock in this table. On the other hand Ormat Technologies, Inc. (NYSE:ORA) is the least popular one with only 17 bullish hedge fund positions. Sterling Bancorp (NYSE:STL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for STL is 35.4. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately STL wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); STL investors were disappointed as the stock returned -5.8% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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