The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Signature Bank (NASDAQ:SBNY) and determine whether the smart money was really smart about this stock.
Signature Bank (NASDAQ:SBNY) investors should be aware of an increase in activity from the world's largest hedge funds of late. Signature Bank (NASDAQ:SBNY) was in 24 hedge funds' portfolios at the end of June. The all time high for this statistics is 36. There were 19 hedge funds in our database with SBNY holdings at the end of March. Our calculations also showed that SBNY isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
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. 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 S&P 500 ETFs by 58 percentage points since March 2017 (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.
Fred Cummings of Elizabeth Park Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Keeping this in mind we're going to take a gander at the fresh hedge fund action surrounding Signature Bank (NASDAQ:SBNY).
What have hedge funds been doing with Signature Bank (NASDAQ:SBNY)?
Heading into the third quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 26% from the first quarter of 2020. On the other hand, there were a total of 29 hedge funds with a bullish position in SBNY a year ago. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
More specifically, First Pacific Advisors LLC was the largest shareholder of Signature Bank (NASDAQ:SBNY), with a stake worth $87.7 million reported as of the end of September. Trailing First Pacific Advisors LLC was Citadel Investment Group, which amassed a stake valued at $70.7 million. Alyeska Investment Group, Basswood 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 Elizabeth Park Capital Management allocated the biggest weight to Signature Bank (NASDAQ:SBNY), around 2.48% of its 13F portfolio. Azora Capital is also relatively very bullish on the stock, dishing out 2.37 percent of its 13F equity portfolio to SBNY.
Now, specific money managers have jumped into Signature Bank (NASDAQ:SBNY) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the biggest position in Signature Bank (NASDAQ:SBNY). Balyasny Asset Management had $18 million invested in the company at the end of the quarter. Chuck Royce's Royce & Associates also initiated a $16 million position during the quarter. The following funds were also among the new SBNY investors: Ravi Chopra's Azora Capital, Daniel Johnson's Gillson Capital, and Fred Cummings's Elizabeth Park Capital Management.
Let's go over hedge fund activity in other stocks similar to Signature Bank (NASDAQ:SBNY). These stocks are Aramark (NYSE:ARMK), American Financial Group, Inc. (NYSE:AFG), Polaris Inc. (NYSE:PII), Inphi Corporation (NYSE:IPHI), Autoliv Inc. (NYSE:ALV), HD Supply Holdings Inc (NASDAQ:HDS), and Apartment Investment and Management Co. (NYSE:AIV). This group of stocks' market caps match SBNY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ARMK,34,597075,5 AFG,28,235585,4e PII,34,426967,10 IPHI,46,643116,10 ALV,22,542948,7 HDS,44,992771,4 AIV,24,488634,3 Average,33.1,561014,6.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.1 hedge funds with bullish positions and the average amount invested in these stocks was $561 million. That figure was $305 million in SBNY's case. Inphi Corporation (NYSE:IPHI) is the most popular stock in this table. On the other hand Autoliv Inc. (NYSE:ALV) is the least popular one with only 22 bullish hedge fund positions. Signature Bank (NASDAQ:SBNY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SBNY is 34.2. 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 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 21.3% in 2020 through September 25th and surpassed the market by 17.7 percentage points. Unfortunately SBNY wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SBNY investors were disappointed as the stock returned -21% since Q2 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.
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Disclosure: None. This article was originally published at Insider Monkey.