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Did Hedge Funds Make The Right Call On First Bancorp (FBP)?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding First Bancorp (NYSE:FBP) and determine whether hedge funds had an edge regarding this stock.

First Bancorp (NYSE:FBP) investors should pay attention to a decrease in activity from the world’s largest hedge funds in recent months. FBP was in 24 hedge funds’ portfolios at the end of the first quarter of 2020. There were 32 hedge funds in our database with FBP positions at the end of the previous quarter. Our calculations also showed that FBP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Today there are a large number of indicators market participants employ to assess publicly traded companies. Two of the less utilized indicators are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the top hedge fund managers can trounce the S&P 500 by a superb amount (see the details here).

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. With all of this in mind let’s take a glance at the fresh hedge fund action surrounding First Bancorp (NYSE:FBP).

How are hedge funds trading First Bancorp (NYSE:FBP)?

At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the fourth quarter of 2019. On the other hand, there were a total of 18 hedge funds with a bullish position in FBP a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is FBP A Good Stock To Buy?

Among these funds, Point72 Asset Management held the most valuable stake in First Bancorp (NYSE:FBP), which was worth $35.4 million at the end of the third quarter. On the second spot was Alyeska Investment Group which amassed $20.1 million worth of shares. EJF Capital, Millennium Management, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position EJF Capital allocated the biggest weight to First Bancorp (NYSE:FBP), around 3.76% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, setting aside 0.56 percent of its 13F equity portfolio to FBP.

Since First Bancorp (NYSE:FBP) has witnessed a decline in interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few hedge funds that slashed their entire stakes in the first quarter. It’s worth mentioning that Jeffrey Hinkle’s Shoals Capital Management cut the largest stake of the 750 funds monitored by Insider Monkey, totaling an estimated $7.9 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund cut about $1.4 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 8 funds in the first quarter.

Let’s now review hedge fund activity in other stocks similar to First Bancorp (NYSE:FBP). These stocks are Verra Mobility Corporation (NASDAQ:VRRM), BrightView Holdings, Inc. (NYSE:BV), Rush Enterprises, Inc. (NASDAQ:RUSHA), and Mobile Mini Inc (NASDAQ:MINI). All of these stocks’ market caps are similar to FBP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VRRM 23 105855 -10
BV 8 160603 -1
RUSHA 17 43687 -7
MINI 18 58994 -6
Average 16.5 92285 -6

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $92 million. That figure was $133 million in FBP’s case. Verra Mobility Corporation (NASDAQ:VRRM) is the most popular stock in this table. On the other hand BrightView Holdings, Inc. (NYSE:BV) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks First Bancorp (NYSE:FBP) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. Unfortunately FBP wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on FBP were disappointed as the stock returned 6% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.