Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards NBT Bancorp Inc. (NASDAQ:NBTB) to find out whether there were any major changes in hedge funds' views.
Is NBTB a good stock to buy? NBT Bancorp Inc. (NASDAQ:NBTB) investors should be aware of a decrease in support from the world's most elite money managers in recent months. NBT Bancorp Inc. (NASDAQ:NBTB) was in 6 hedge funds' portfolios at the end of March. The all time high for this statistic is 11. There were 11 hedge funds in our database with NBTB holdings at the end of December. Our calculations also showed that NBTB isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Anton Schutz of Mendon Capital Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we're going to take a peek at the fresh hedge fund action encompassing NBT Bancorp Inc. (NASDAQ:NBTB).
Do Hedge Funds Think NBTB Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -45% from the previous quarter. By comparison, 4 hedge funds held shares or bullish call options in NBTB a year ago. With hedgies' sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Among these funds, Citadel Investment Group held the most valuable stake in NBT Bancorp Inc. (NASDAQ:NBTB), which was worth $3.4 million at the end of the fourth quarter. On the second spot was AQR Capital Management which amassed $2.6 million worth of shares. Mendon Capital Advisors, Millennium Management, and Renaissance Technologies 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 Mendon Capital Advisors allocated the biggest weight to NBT Bancorp Inc. (NASDAQ:NBTB), around 0.73% of its 13F portfolio. AQR Capital Management is also relatively very bullish on the stock, designating 0.0042 percent of its 13F equity portfolio to NBTB.
Because NBT Bancorp Inc. (NASDAQ:NBTB) has faced declining sentiment from hedge fund managers, it's easy to see that there lies a certain "tier" of money managers who were dropping their entire stakes last quarter. At the top of the heap, Paul Tudor Jones's Tudor Investment Corp cut the biggest investment of the "upper crust" of funds watched by Insider Monkey, totaling about $0.5 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund dumped about $0.4 million worth. These transactions are important to note, as total hedge fund interest fell by 5 funds last quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as NBT Bancorp Inc. (NASDAQ:NBTB) but similarly valued. We will take a look at Monmouth Real Estate Investment Corp. (NYSE:MNR), Sapiens International Corporation N.V. (NASDAQ:SPNS), Scholar Rock Holding Corporation (NASDAQ:SRRK), Provident Financial Services, Inc. (NYSE:PFS), Afya Limited (NASDAQ:AFYA), Victory Capital Holdings, Inc. (NASDAQ:VCTR), and Tri Continental Corporation (NYSE:TY). This group of stocks' market caps resemble NBTB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MNR,13,58825,1 SPNS,12,46366,-2 SRRK,14,170425,0 PFS,11,24090,0 AFYA,5,11779,-3 VCTR,14,86482,2 TY,2,690,0 Average,10.1,56951,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.1 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $11 million in NBTB's case. Scholar Rock Holding Corporation (NASDAQ:SRRK) is the most popular stock in this table. On the other hand Tri Continental Corporation (NYSE:TY) is the least popular one with only 2 bullish hedge fund positions. NBT Bancorp Inc. (NASDAQ:NBTB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NBTB is 33. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and surpassed the market again by 4.8 percentage points. Unfortunately NBTB wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); NBTB investors were disappointed as the stock returned -5.7% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.