We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards F.N.B. Corp (NYSE:FNB).
Is F.N.B. Corp (NYSE:FNB) a buy right now? Hedge funds are in a bullish mood. The number of bullish hedge fund bets went up by 4 lately. Our calculations also showed that FNB isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 41 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.
[caption id="attachment_735636" align="aligncenter" width="400"] Matthew Lindenbaum of Basswood Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Keeping this in mind we're going to take a look at the latest hedge fund action surrounding F.N.B. Corp (NYSE:FNB).
What have hedge funds been doing with F.N.B. Corp (NYSE:FNB)?
At the end of the fourth quarter, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FNB over the last 18 quarters. With the smart money's capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
The largest stake in F.N.B. Corp (NYSE:FNB) was held by Renaissance Technologies, which reported holding $55.7 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $20.9 million position. Other investors bullish on the company included EJF Capital, D E Shaw, and Basswood Capital. In terms of the portfolio weights assigned to each position EJF Capital allocated the biggest weight to F.N.B. Corp (NYSE:FNB), around 1.13% of its 13F portfolio. Minerva Advisors is also relatively very bullish on the stock, dishing out 0.63 percent of its 13F equity portfolio to FNB.
As industrywide interest jumped, specific money managers were leading the bulls' herd. ExodusPoint Capital, managed by Michael Gelband, initiated the most outsized position in F.N.B. Corp (NYSE:FNB). ExodusPoint Capital had $0.3 million invested in the company at the end of the quarter. Matthew Tewksbury's Stevens Capital Management also initiated a $0.2 million position during the quarter. The following funds were also among the new FNB investors: Cliff Asness's AQR Capital Management, William Harnisch's Peconic Partners LLC, and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as F.N.B. Corp (NYSE:FNB) but similarly valued. These stocks are B2Gold Corp (NYSE:BTG), Thor Industries, Inc. (NYSE:THO), Murphy Oil Corporation (NYSE:MUR), and Parsons Corporation (NYSE:PSN). This group of stocks' market caps are closest to FNB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BTG,17,242934,3 THO,30,247356,0 MUR,24,161932,6 PSN,10,94767,-3 Average,20.25,186747,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $187 million. That figure was $124 million in FNB's case. Thor Industries, Inc. (NYSE:THO) is the most popular stock in this table. On the other hand Parsons Corporation (NYSE:PSN) is the least popular one with only 10 bullish hedge fund positions. F.N.B. Corp (NYSE:FNB) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately FNB wasn't nearly as popular as these 20 stocks and hedge funds that were betting on FNB were disappointed as the stock returned -46.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
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