At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Sandy Spring Bancorp Inc. (NASDAQ:SASR) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Is Sandy Spring Bancorp Inc. (NASDAQ:SASR) undervalued? The smart money was turning less bullish. The number of long hedge fund positions were trimmed by 3 in recent months. Our calculations also showed that SASR 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 was 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s go over the recent hedge fund action surrounding Sandy Spring Bancorp Inc. (NASDAQ:SASR).
How have hedgies been trading Sandy Spring Bancorp Inc. (NASDAQ:SASR)?
At the end of the first quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SASR 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.
Among these funds, Renaissance Technologies held the most valuable stake in Sandy Spring Bancorp Inc. (NASDAQ:SASR), which was worth $16.1 million at the end of the third quarter. On the second spot was Forest Hill Capital which amassed $8.6 million worth of shares. Arrowstreet Capital, Millennium Management, and Citadel Investment Group 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 Forest Hill Capital allocated the biggest weight to Sandy Spring Bancorp Inc. (NASDAQ:SASR), around 4.6% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, dishing out 0.05 percent of its 13F equity portfolio to SASR.
Judging by the fact that Sandy Spring Bancorp Inc. (NASDAQ:SASR) has experienced declining sentiment from the smart money, logic holds that there is a sect of funds who sold off their positions entirely last quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace LLP cut the largest stake of the “upper crust” of funds tracked by Insider Monkey, valued at about $1.1 million in stock. Peter Algert and Kevin Coldiron’s fund, Algert Coldiron Investors, also said goodbye to its stock, about $0.7 million worth. These transactions are interesting, as total hedge fund interest dropped by 3 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Sandy Spring Bancorp Inc. (NASDAQ:SASR). These stocks are Anterix Inc. (NASDAQ:ATEX), Natus Medical Inc (NASDAQ:NTUS), FARO Technologies, Inc. (NASDAQ:FARO), and Hollysys Automation Technologies Ltd (NASDAQ:HOLI). This group of stocks’ market caps match SASR’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $160 million. That figure was $37 million in SASR’s case. Natus Medical Inc (NASDAQ:NTUS) is the most popular stock in this table. On the other hand Anterix Inc. (NASDAQ:ATEX) is the least popular one with only 11 bullish hedge fund positions. Sandy Spring Bancorp Inc. (NASDAQ:SASR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately SASR wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SASR investors were disappointed as the stock returned 10.9% during the second quarter 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 in 2020.
Disclosure: None. This article was originally published at Insider Monkey.