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Do Hedge Funds Love Nicolet Bankshares Inc. (NCBS)?

In this article we will take a look at whether hedge funds think Nicolet Bankshares Inc. (NASDAQ:NCBS) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Nicolet Bankshares Inc. (NASDAQ:NCBS) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds’ portfolios at the end of March. 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 Abercrombie & Fitch Co. (NYSE:ANF), SilverCrest Metals Inc. (NYSE:SILV), and Repay Holdings Corporation (NASDAQ:RPAY) to gather more data points. Our calculations also showed that NCBS 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Ken Griffin CITADEL INVESTMENT GROUP

Ken Griffin of Citadel Investment Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s check out the new hedge fund action regarding Nicolet Bankshares Inc. (NASDAQ:NCBS).

What does smart money think about Nicolet Bankshares Inc. (NASDAQ:NCBS)?

At Q1’s end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in NCBS over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of Nicolet Bankshares Inc. (NASDAQ:NCBS), with a stake worth $2.6 million reported as of the end of September. Trailing Renaissance Technologies was Winton Capital Management, which amassed a stake valued at $1.6 million. Citadel Investment Group, Two Sigma Advisors, and PDT Partners 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 Winton Capital Management allocated the biggest weight to Nicolet Bankshares Inc. (NASDAQ:NCBS), around 0.04% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to NCBS.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Arrowstreet Capital. 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 Citadel Investment Group).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Nicolet Bankshares Inc. (NASDAQ:NCBS) but similarly valued. These stocks are Abercrombie & Fitch Co. (NYSE:ANF), SilverCrest Metals Inc. (NYSE:SILV), Repay Holdings Corporation (NASDAQ:RPAY), and The York Water Company (NASDAQ:YORW). This group of stocks’ market values are similar to NCBS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ANF 23 163425 -3
SILV 9 34421 -2
RPAY 8 112989 -4
YORW 11 25816 3
Average 12.75 84163 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $5 million in NCBS’s case. Abercrombie & Fitch Co. (NYSE:ANF) is the most popular stock in this table. On the other hand Repay Holdings Corporation (NASDAQ:RPAY) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Nicolet Bankshares Inc. (NASDAQ:NCBS) is even less popular than RPAY. Hedge funds dodged a bullet by taking a bearish stance towards NCBS. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately NCBS wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); NCBS investors were disappointed as the stock returned 2.4% during the second quarter (through the end of May) 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 so far in 2020.

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