How First Citizens BancShares Inc. (FCNCA) Stacks Up Against Its Peers

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.

Hedge fund interest in First Citizens BancShares Inc. (NASDAQ:FCNCA) shares was flat at the end of last quarter, with 11 hedge fund holding at the end of September. This is usually a negative indicator. At the end of this article we will also compare FCNCA to other stocks including Telecom Argentina S.A. (ADR) (NYSE:TEO), Webster Financial Corporation (NYSE:WBS), and Tallgrass Energy Partners LP(NYSE:TEP) to get a better sense of its popularity.

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What does the smart money think about First Citizens BancShares Inc. (NASDAQ:FCNCA)?

At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in FCNCA at the beginning of this year. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Chuck Royce’s Royce & Associates has the number one position in First Citizens BancShares Inc. (NASDAQ:FCNCA), worth close to $61 million. Sitting at the No. 2 spot is Joe Huber of Huber Capital Management, with a $43.1 million position; 1.7% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish encompass Paul J. Isaac’s Arbiter Partners Capital Management, Cliff Asness’ AQR Capital Management and Matthew Lindenbaum’s Basswood Capital. We should note that Arbiter Partners Capital Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Highbridge Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was PEAK6 Capital Management).

Let’s go over hedge fund activity in other stocks similar to First Citizens BancShares Inc. (NASDAQ:FCNCA). We will take a look at Telecom Argentina S.A. (ADR) (NYSE:TEO), Webster Financial Corporation (NYSE:WBS), Tallgrass Energy Partners LP(NYSE:TEP), and Legg Mason, Inc. (NYSE:LM). This group of stocks’ market valuations match FCNCA’s market valuation.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $216 million. That figure was $141 million in FCNCA’s case. Legg Mason, Inc. (NYSE:LM) is the most popular stock in this table. On the other hand Tallgrass Energy Partners LP (NYSE:TEP) is the least popular one with only 5 bullish hedge fund positions. First Citizens BancShares Inc. (NASDAQ:FCNCA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard LM might be a better candidate to consider taking a long position in.

Disclosure: None