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Do Hedge Funds Like Sterling Bancorp (STL)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Sterling Bancorp (NYSE:STL) based on that data and determine whether they were really smart about the stock.

Sterling Bancorp (NYSE:STL) has seen an increase in hedge fund interest lately. Sterling Bancorp (NYSE:STL) was in 27 hedge funds’ portfolios at the end of June. The all time high for this statistics is 30. There were 25 hedge funds in our database with STL holdings at the end of March. Our calculations also showed that STL isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

If you’d ask most shareholders, hedge funds are seen as slow, old investment tools of years past. While there are more than 8000 funds trading at the moment, Our experts hone in on the moguls of this group, around 850 funds. These hedge fund managers administer the majority of all hedge funds’ total capital, and by paying attention to their highest performing equity investments, Insider Monkey has brought to light several investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Matthew Lindenbaum Basswood Capital

Matthew Lindenbaum of Basswood Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we’re going to go over the latest hedge fund action encompassing Sterling Bancorp (NYSE:STL).

How have hedgies been trading Sterling Bancorp (NYSE:STL)?

Heading into the third quarter of 2020, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards STL over the last 20 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Diamond Hill Capital held the most valuable stake in Sterling Bancorp (NYSE:STL), which was worth $82.3 million at the end of the third quarter. On the second spot was Basswood Capital which amassed $38.1 million worth of shares. GAMCO Investors, Castine Capital Management, and Gillson Capital 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 Castine Capital Management allocated the biggest weight to Sterling Bancorp (NYSE:STL), around 7.15% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, earmarking 3.66 percent of its 13F equity portfolio to STL.

Now, key hedge funds were leading the bulls’ herd. AQR Capital Management, managed by Cliff Asness, assembled the largest position in Sterling Bancorp (NYSE:STL). AQR Capital Management had $1.2 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $0.9 million investment in the stock during the quarter. The other funds with brand new STL positions are Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Minhua Zhang’s Weld Capital Management, and Karim Abbadi and Edward McBride’s Centiva Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Sterling Bancorp (NYSE:STL) but similarly valued. We will take a look at Old National Bancorp (NASDAQ:ONB), TC Pipelines, LP (NYSE:TCP), Sunoco LP (NYSE:SUN), American Equity Investment Life Holding Company (NYSE:AEL), YPF Sociedad Anonima (NYSE:YPF), Teradata Corporation (NYSE:TDC), and Mercury General Corporation (NYSE:MCY). This group of stocks’ market caps are similar to STL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ONB 17 25811 2
TCP 2 2582 0
SUN 4 14541 0
AEL 12 49529 0
YPF 8 19521 -5
TDC 31 238067 7
MCY 17 149274 -5
Average 13 71332 -0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $180 million in STL’s case. Teradata Corporation (NYSE:TDC) is the most popular stock in this table. On the other hand TC Pipelines, LP (NYSE:TCP) is the least popular one with only 2 bullish hedge fund positions. Sterling Bancorp (NYSE:STL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for STL is 77.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 21.3% in 2020 through September 25th and beat the market by 17.7 percentage points. Unfortunately STL wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on STL were disappointed as the stock returned -11.5% during the same time period 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 many of these stocks already outperformed the market so far this year.

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