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Hedge Funds Are Dumping New York Community Bancorp, Inc. (NYCB)

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of New York Community Bancorp, Inc. (NYSE:NYCB) based on that data.

New York Community Bancorp, Inc. (NYSE:NYCB) investors should be aware of a decrease in enthusiasm from smart money in recent months. Our calculations also showed that NYCB 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 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.

Phill Gross of Adage Capital Management

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 trades like this one. 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. With all of this in mind let’s review the new hedge fund action encompassing New York Community Bancorp, Inc. (NYSE:NYCB).

What have hedge funds been doing with New York Community Bancorp, Inc. (NYSE:NYCB)?

Heading into the second quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in NYCB a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Citadel Investment Group was the largest shareholder of New York Community Bancorp, Inc. (NYSE:NYCB), with a stake worth $74.7 million reported as of the end of September. Trailing Citadel Investment Group was Kahn Brothers, which amassed a stake valued at $49 million. Adage Capital Management, Renaissance Technologies, and Winton Capital Management 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 Kahn Brothers allocated the biggest weight to New York Community Bancorp, Inc. (NYSE:NYCB), around 8.96% of its 13F portfolio. Strycker View Capital is also relatively very bullish on the stock, earmarking 5.32 percent of its 13F equity portfolio to NYCB.

Since New York Community Bancorp, Inc. (NYSE:NYCB) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there was a specific group of fund managers who were dropping their entire stakes last quarter. At the top of the heap, Noam Gottesman’s GLG Partners sold off the biggest position of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $8.7 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also sold off its stock, about $5.4 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 5 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as New York Community Bancorp, Inc. (NYSE:NYCB) but similarly valued. We will take a look at CoreSite Realty Corp (NYSE:COR), Chegg Inc (NYSE:CHGG), Robert Half International Inc. (NYSE:RHI), and Flowers Foods, Inc. (NYSE:FLO). This group of stocks’ market caps are similar to NYCB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
COR 23 267395 2
CHGG 34 302599 -5
RHI 26 247265 3
FLO 27 227639 7
Average 27.5 261225 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $261 million. That figure was $193 million in NYCB’s case. Chegg Inc (NYSE:CHGG) is the most popular stock in this table. On the other hand CoreSite Realty Corp (NYSE:COR) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks New York Community Bancorp, Inc. (NYSE:NYCB) is even less popular than COR. Hedge funds dodged a bullet by taking a bearish stance towards NYCB. 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 13.9% in 2020 through June 10th but managed to beat the market by 14.2 percentage points. Unfortunately NYCB wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); NYCB investors were disappointed as the stock returned 17.3% during the second quarter (through June 10th) 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.