Castine Capital’s Profitable Q3 Bets On QCR Holdings, Inc. (QCRH), U.S. Bancorp (USB), More

Castine Capital Management is a Boston-based investment firm managed by Paul Magidson, Jonathan Cohen and Ostrom Enders. Castine’s equity portfolio has a value of $201.25 million as of the end of the third quarter, down slightly from $208 million a quarter earlier. However, the declines don’t seem to be the result of poor performance, as the fund’s picks returned 11.15% in the September quarter when looking at its 12 long positions in $1 billion+ companies. Four of its top picks on June 30 were QCR Holdings, Inc. (NASDAQ:QCRH), PNC Financial Services (NYSE:PNC), Yadkin Financial Corp (NASDAQ:YDKN), and U.S. Bancorp (NYSE:USB), which we’ll analyze in this article.

We believe that investors should pay attention to hedge funds’ top picks for a chance to beat the market. Our years of research has established that long positions picked by top hedge funds surpass the market in terms of returns. When we look at the third-quarter returns of the hedge funds in our database which had at least 5 long positions in companies valued at $1 billion or more on June 30, we see their long picks returned 8.3% on average, a full 5.0 percentage points clear of S&P 500 ETFs. However, that long stock-picking prowess is often overshadowed by the hedged portion of their portfolios, in options, bonds, and short positions.

Castine Capital Management decreased its holding in QCR Holdings, Inc. (NASDAQ:QCRH) by 27% in the third quarter, ending the period with a total of 506,619 shares of the company which had a value of $16.08 million at the end of the quarter. In the second quarter, the hedge fund had upped its stake in the company by 40%. It appears that Castine took profits off the table in the third quarter, as the stock jumped by 16.9%.

At Q2’s end, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 13% drop from the first quarter of 2016. Robert I. Usdan and Wayne K. Goldstein of Endicott Management, have an $11.7 million position in QCR as of June 30; the fund had 4.3% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that held long positions contain Fred Cummings’ Elizabeth Park Capital Management, Jim Simons’ Renaissance Technologies, and Tom Brown’s Second Curve Capital.

Castine Capital Management moved into the final quarter of 2016 with 388,080 shares of Yadkin Financial Corp (NASDAQ:YDKN) in its portfolio, which had a net worth of $10.20 million on September 30 after the stock gained 5.2% during the third quarter. The largest stake in Yadkin Financial Corp (NASDAQ:YDKN) among the funds that we track was held by Mendon Capital Advisors, which reported holding $55.4 million worth of stock as of the end of June. It was followed by Endicott Management with a $50.6 million position. Other investors bullish on the company included EJF Capital, Millennium Management, and Renaissance Technologies.

We’ll check out two more of the fund’s stock picks on the next page.

Castine Capital Management shrunk its stake in PNC Financial Services (NYSE:PNC) in the third quarter, as it reported owning 62,067 shares of the company as of September 30, versus 65,000 shares a quarter earlier. The worth of the updated stake was $5.59 million at the end of September. The stock returned 11.4% during the third quarter.

Heading into the third quarter of 2016, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, down by 4% from the first quarter of 2016. When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the most valuable position in PNC Financial Services (NYSE:PNC). AQR Capital Management has a $378.9 million position in the stock, comprising 0.7% of its 13F portfolio. The second largest stake is held by Pzena Investment Management, managed by Richard S. Pzena, which holds a $174.3 million position. Some other professional money managers that are bullish contain Ric Dillon’s Diamond Hill Capital, D E Shaw, founded by David E. Shaw, and Mario Gabelli’s GAMCO Investors.

Lastly, Castine Capital Management sold off its stake in U.S. Bancorp (NYSE:USB) in the third quarter. The fund had 111,250 shares of the company at the start of the second quarter but unloaded them during the third quarter, during which time the stock returned 7%.

Heading into the third quarter of 2016, Castine was one of 48 hedge funds tracked by Insider Monkey which held long positions in the stock, a 2% increase from one quarter earlier. The largest stake in U.S. Bancorp (NYSE:USB) was held by Berkshire Hathaway, which reported holding $3.43 billion worth of stock as of the end of June. It was followed by First Eagle Investment Management with a $458.1 million position. Other investors bullish on the company included Yacktman Asset Management, Maverick Capital, and Renaissance Technologies.

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