Is First Financial Bancorp (NASDAQ:FFBC) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
First Financial Bancorp (NASDAQ:FFBC) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 8 hedge funds' portfolios at the end of June. At the end of this article we will also compare FFBC to other stocks including Covanta Holding Corporation (NYSE:CVA), Nelnet, Inc. (NYSE:NNI), and First Bancorp (NYSE:FBP) to get a better sense of its popularity. Our calculations also showed that FFBC isn't among the 30 most popular stocks among hedge funds (view the video below). 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 our short portfolio.
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 review the latest hedge fund action surrounding First Financial Bancorp (NASDAQ:FFBC).
How have hedgies been trading First Financial Bancorp (NASDAQ:FFBC)?
Heading into the third quarter of 2019, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the first quarter of 2019. By comparison, 9 hedge funds held shares or bullish call options in FFBC a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
More specifically, Millennium Management was the largest shareholder of First Financial Bancorp (NASDAQ:FFBC), with a stake worth $11.3 million reported as of the end of March. Trailing Millennium Management was Renaissance Technologies, which amassed a stake valued at $9 million. Citadel Investment Group, Marshall Wace LLP, and PEAK6 Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as First Financial Bancorp (NASDAQ:FFBC) has experienced falling interest from hedge fund managers, it's easy to see that there is a sect of fund managers that elected to cut their entire stakes heading into Q3. Interestingly, Dmitry Balyasny's Balyasny Asset Management cut the largest stake of the "upper crust" of funds tracked by Insider Monkey, totaling close to $2.8 million in stock, and Noam Gottesman's GLG Partners was right behind this move, as the fund said goodbye to about $0.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks similar to First Financial Bancorp (NASDAQ:FFBC). We will take a look at Covanta Holding Corporation (NYSE:CVA), Nelnet, Inc. (NYSE:NNI), First Bancorp (NYSE:FBP), and Applied Industrial Technologies, Inc. (NYSE:AIT). This group of stocks' market valuations match FFBC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CVA,15,102764,-3 NNI,13,94103,-2 FBP,23,214538,5 AIT,18,108981,1 Average,17.25,130097,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $130 million. That figure was $29 million in FFBC's case. First Bancorp (NYSE:FBP) is the most popular stock in this table. On the other hand Nelnet, Inc. (NYSE:NNI) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks First Financial Bancorp (NASDAQ:FFBC) is even less popular than NNI. 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. A small number of hedge funds were also right about betting on FFBC, though not to the same extent, as the stock returned 2.1% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.