Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 24.4% during the first 9 months of 2019 and outperformed the broader market benchmark by 4 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Hedge fund interest in The First of Long Island Corporation (NASDAQ:FLIC) 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 Vista Outdoor Inc (NYSE:VSTO), The First Bancshares, Inc. (NASDAQ:FBMS), and Agilysys, Inc. (NASDAQ:AGYS) to gather more data points. Our calculations also showed that FLIC isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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 take a peek at the key hedge fund action encompassing The First of Long Island Corporation (NASDAQ:FLIC).
How are hedge funds trading The First of Long Island Corporation (NASDAQ:FLIC)?
At the end of the second quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FLIC over the last 16 quarters. With hedge funds' sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of The First of Long Island Corporation (NASDAQ:FLIC), with a stake worth $14.1 million reported as of the end of March. Trailing Renaissance Technologies was Diamond Hill Capital, which amassed a stake valued at $10.5 million. Millennium Management, Chilton Investment Company, and Royce & Associates were also very fond of the stock, giving the stock large weights in their portfolios.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. 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 Chilton Investment Company).
Let's now take a look at hedge fund activity in other stocks similar to The First of Long Island Corporation (NASDAQ:FLIC). These stocks are Vista Outdoor Inc (NYSE:VSTO), The First Bancshares, Inc. (NASDAQ:FBMS), Agilysys, Inc. (NASDAQ:AGYS), and Ducommun Incorporated (NYSE:DCO). All of these stocks' market caps are similar to FLIC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VSTO,16,72142,-1 FBMS,7,28083,-1 AGYS,13,122986,-1 DCO,11,68597,2 Average,11.75,72952,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $37 million in FLIC's case. Vista Outdoor Inc (NYSE:VSTO) is the most popular stock in this table. On the other hand The First Bancshares, Inc. (NASDAQ:FBMS) is the least popular one with only 7 bullish hedge fund positions. The First of Long Island Corporation (NASDAQ:FLIC) 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 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 FLIC as the stock returned 14.2% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.