U.S. Markets closed

Here’s What Hedge Funds Think About Sterling Bancorp (STL)

Asma UL Husna

During the fourth quarter the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by nearly 7 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Sterling Bancorp (NYSE:STL) and see how the stock is affected by the recent hedge fund activity.

Sterling Bancorp (NYSE:STL) has seen a decrease in hedge fund sentiment recently. STL was in 18 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 21 hedge funds in our database with STL holdings at the end of the previous quarter. Our calculations also showed that STL isn't among the 30 most popular stocks among hedge funds.

In the eyes of most shareholders, hedge funds are assumed to be unimportant, old investment tools of years past. While there are over 8000 funds with their doors open today, Our researchers hone in on the bigwigs of this club, approximately 750 funds. These investment experts shepherd bulk of the hedge fund industry's total capital, and by observing their top equity investments, Insider Monkey has unsheathed several investment strategies that have historically defeated the market. Insider Monkey's flagship hedge fund strategy outrun the S&P 500 index by nearly 5 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

Matthew Lindenbaum Basswood Capital

We're going to view the fresh hedge fund action encompassing Sterling Bancorp (NYSE:STL).

What have hedge funds been doing with Sterling Bancorp (NYSE:STL)?

At Q4's end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the second quarter of 2018. By comparison, 17 hedge funds held shares or bullish call options in STL a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

STL_apr2019

Among these funds, Citadel Investment Group held the most valuable stake in Sterling Bancorp (NYSE:STL), which was worth $122.7 million at the end of the third quarter. On the second spot was EJF Capital which amassed $55.8 million worth of shares. Moreover, Basswood Capital, Millennium Management, and Diamond Hill Capital were also bullish on Sterling Bancorp (NYSE:STL), allocating a large percentage of their portfolios to this stock.

Judging by the fact that Sterling Bancorp (NYSE:STL) has faced declining sentiment from the smart money, it's easy to see that there lies a certain "tier" of hedge funds who sold off their full holdings by the end of the third quarter. At the top of the heap, Malcolm Fairbairn's Ascend Capital said goodbye to the biggest position of the "upper crust" of funds tracked by Insider Monkey, worth close to $5.8 million in stock, and Michael Platt and William Reeves's BlueCrest Capital Mgmt. was right behind this move, as the fund cut about $2.8 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 3 funds by the end of the third quarter.

Let's check out hedge fund activity in other stocks similar to Sterling Bancorp (NYSE:STL). These stocks are Pebblebrook Hotel Trust (NYSE:PEB), The New York Times Company (NYSE:NYT), Telephone & Data Systems, Inc. (NYSE:TDS), and Shell Midstream Partners LP (NYSE:SHLX). This group of 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 PEB,12,79370,1 NYT,32,820804,-2 TDS,22,433911,2 SHLX,8,25882,2 Average,18.5,339992,0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $340 million. That figure was $445 million in STL's case. The New York Times Company (NYSE:NYT) is the most popular stock in this table. On the other hand Shell Midstream Partners LP (NYSE:SHLX) is the least popular one with only 8 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 calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on STL, though not to the same extent, as the stock returned 21.5% and outperformed the market as well.

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

Related Content