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 Valley National Bancorp (NASDAQ:VLY).
Is Valley National Bancorp (NASDAQ:VLY) a bargain? Money managers are taking an optimistic view. The number of bullish hedge fund positions improved by 4 in recent months. Our calculations also showed that VLY 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.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 stocks that are in our short portfolio.
[caption id="attachment_26092" align="aligncenter" width="600"] Joel Greenblatt of Gotham Asset Management[/caption]
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 based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let's go over the new hedge fund action surrounding Valley National Bancorp (NASDAQ:VLY).
How have hedgies been trading Valley National Bancorp (NASDAQ:VLY)?
At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 36% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards VLY over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Valley National Bancorp (NASDAQ:VLY), with a stake worth $4.6 million reported as of the end of September. Trailing Renaissance Technologies was Holocene Advisors, which amassed a stake valued at $1.3 million. GLG Partners, Springbok Capital, and Balyasny Asset Management 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 Signition LP allocated the biggest weight to Valley National Bancorp (NASDAQ:VLY), around 0.47% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, dishing out 0.19 percent of its 13F equity portfolio to VLY.
As industrywide interest jumped, key money managers were breaking ground themselves. GLG Partners, managed by Noam Gottesman, initiated the largest position in Valley National Bancorp (NASDAQ:VLY). GLG Partners had $1.3 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $1 million position during the quarter. The other funds with new positions in the stock are Israel Englander's Millennium Management, Joel Greenblatt's Gotham Asset Management, and Steve Cohen's Point72 Asset Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Valley National Bancorp (NASDAQ:VLY) but similarly valued. These stocks are Blueprint Medicines Corporation (NASDAQ:BPMC), GSX Techedu Inc. (NYSE:GSX), Sibanye Gold Ltd (NYSE:SBGL), and ANGI Homeservices Inc. (NASDAQ:ANGI). This group of stocks' market valuations are similar to VLY's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BPMC,26,707543,-1 GSX,3,6778,1 SBGL,14,135328,5 ANGI,21,261024,1 Average,16,277668,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $278 million. That figure was $13 million in VLY's case. Blueprint Medicines Corporation (NASDAQ:BPMC) is the most popular stock in this table. On the other hand GSX Techedu Inc. (NYSE:GSX) is the least popular one with only 3 bullish hedge fund positions. Valley National Bancorp (NASDAQ:VLY) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on VLY, though not to the same extent, as the stock returned 6.5% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.