Do Hedge Funds Love Signature Bank (SBNY)?

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

Signature Bank (NASDAQ:SBNY) was in 29 hedge funds’ portfolios at the end of September. SBNY has experienced an increase in hedge fund interest lately. There were 27 hedge funds in our database with SBNY positions at the end of the previous quarter. 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 Allegion PLC (NYSE:ALLE), Mallinckrodt PLC (NYSE:MNK), and CDW Corp (NASDAQ:CDW) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

How have hedgies been trading Signature Bank (NASDAQ:SBNY)?

Heading into the fourth quarter of 2016, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a rise of 7% from the second quarter of 2016. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Ken Griffin’s Citadel Investment Group has the most valuable position in Signature Bank (NASDAQ:SBNY), worth close to $160 million. The second largest stake is held by Renaissance Technologies, managed by Jim Simons, which holds a $55.6 million position. Some other hedge funds and institutional investors that are bullish contain Cliff Asness’ AQR Capital Management, Matthew Lindenbaum’s Basswood Capital and Matthew A. Weatherbie’s Weatherbie Capital.

Now, some big names have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, assembled the most outsized position in Signature Bank (NASDAQ:SBNY). Point72 Asset Management had $20.1 million invested in the company at the end of the quarter. Malcolm Fairbairn’s Ascend Capital also made a $16.7 million investment in the stock during the quarter. The following funds were also among the new SBNY investors: Glenn Russell Dubin’s Highbridge Capital Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Signature Bank (NASDAQ:SBNY) but similarly valued. We will take a look at Allegion PLC (NYSE:ALLE), Mallinckrodt PLC (NYSE:MNK), CDW Corp (NASDAQ:CDW), and RPM International Inc. (NYSE:RPM). This group of stocks’ market caps match SBNY’s market cap.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $689 million. That figure was $456 million in SBNY’s case. Allegion PLC (NYSE:ALLE) is the most popular stock in this table. On the other hand CDW Corp (NASDAQ:CDW) is the least popular one with only 21 bullish hedge fund positions. Signature Bank (NASDAQ:SBNY) 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. In this regard ALLE might be a better candidate to consider a long position.

Disclosure: None