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Hedge Fund Sentiment Is Stagnant On First Financial Bancorp (FFBC)

Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze First Financial Bancorp (NASDAQ:FFBC) from the perspective of those successful funds.

First Financial Bancorp (NASDAQ:FFBC) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 8 hedge funds’ portfolios at the end of September. At the end of this article we will also compare FFBC to other stocks including Qualys Inc (NASDAQ:QLYS), OneBeacon Insurance Group, Ltd. (NYSE:OB), and Cvent Inc (NYSE:CVT) 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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How are hedge funds trading First Financial Bancorp (NASDAQ:FFBC)?

At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in FFBC heading into this year. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

HedgeFundSentimentChart

Of the funds tracked by Insider Monkey, Millennium Management, one of the 10 largest hedge funds in the world, holds the number one position in First Financial Bancorp (NASDAQ:FFBC). Millennium Management has a $12.9 million position in the stock. On Millennium Management’s heels is Renaissance Technologies, which holds a $7.2 million position. Remaining peers that are bullish consist of Cliff Asness’ AQR Capital Management, Ken Griffin’s Citadel Investment Group and Roger Ibbotson’s Zebra Capital Management. 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.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as First Financial Bancorp (NASDAQ:FFBC) but similarly valued. These stocks are Qualys Inc (NASDAQ:QLYS), OneBeacon Insurance Group, Ltd. (NYSE:OB), Cvent Inc (NYSE:CVT), and Knight Capital Group Inc. (NYSE:KCG). This group of stocks’ market caps resemble FFBC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
QLYS 14 182096 1
OB 10 18859 -1
CVT 15 115344 -5
KCG 13 67081 -2

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 $96 million. That figure was $28 million in FFBC’s case. Cvent Inc (NYSE:CVT) is the most popular stock in this table. On the other hand OneBeacon Insurance Group, Ltd. (NYSE:OB) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks First Financial Bancorp (NASDAQ:FFBC) is even less popular than OB. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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