Do Hedge Funds Love Sterling Bancorp (STL)?

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.

Is Sterling Bancorp (NYSE:STL) a good investment now? It looks like money managers are buying. During the third quarter, the number of investors from the Insider Monkey database bullish on STL went up by four to 13. At the end of this article we will also compare STL to other stocks including Chemed Corporation (NYSE:CHE), Electronics For Imaging, Inc. (NASDAQ:EFII), and Paylocity Holding Corp (NASDAQ:PCTY) to get a better sense of its popularity.

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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

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With all of this in mind, we’re going to go over the fresh action encompassing Sterling Bancorp (NYSE:STL).

How are hedge funds trading Sterling Bancorp (NYSE:STL)?

At the end of the third quarter, 13 funds tracked by Insider Monkey held long positions in Sterling Bancorp, which represents an increase of 44% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in STL heading into 2016. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

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When looking at the institutional investors followed by Insider Monkey, Mario Gabelli’s GAMCO Investors has the biggest position in Sterling Bancorp (NYSE:STL), worth close to $20.6 million, comprising 0.1% of its total 13F portfolio. The second most bullish fund is Kahn Brothers, with a $17.7 million position; the fund has 3.2% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions contain Ric Dillon’s Diamond Hill Capital and Matthew Lindenbaum’s Basswood Capital. We should note that none of these hedge funds are 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.