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Is First Republic Bank (FRC) Going to Burn These Hedge Funds?

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The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards First Republic Bank (NYSE:FRC).

First Republic Bank (NYSE:FRC) investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. FRC was in 25 hedge funds’ portfolios at the end of September. There were 22 hedge funds in our database with FRC holdings 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 ONEOK, Inc. (NYSE:OKE), Medivation Inc (NASDAQ:MDVN), and Lennar Corporation (NYSE:LEN) to gather more data points.

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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year, involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs.

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Keeping this in mind, let’s take a look at the key action regarding First Republic Bank (NYSE:FRC).

Hedge fund activity in First Republic Bank (NYSE:FRC)

At Q3’s end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 14% from the second quarter of 2016. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
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According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Select Equity Group, managed by Robert Joseph Caruso, holds the biggest position in First Republic Bank (NYSE:FRC). According to its latest 13F filing, the fund has a $299.6 million position in the stock, comprising 2.6% of its 13F portfolio. The second largest stake is held by Ric Dillon of Diamond Hill Capital, with a $62.3 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish comprise Robert B. Gillam’s McKinley Capital Management, Ken Fisher’s Fisher Asset Management and Paul Marshall and Ian Wace’s Marshall Wace LLP.

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