Hedge Funds Getting Out Of Signature Bank (SBNY)

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 (Recession is Imminent: We Need A Travel Ban NOW). 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 Signature Bank (NASDAQ:SBNY).

Signature Bank (NASDAQ:SBNY) investors should pay attention to a decrease in hedge fund sentiment recently. SBNY was in 19 hedge funds’ portfolios at the end of March. There were 21 hedge funds in our database with SBNY holdings at the end of the previous quarter. Our calculations also showed that SBNY 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.


Cliff Asness of AQR Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 check out the latest hedge fund action surrounding Signature Bank (NASDAQ:SBNY).

What does smart money think about Signature Bank (NASDAQ:SBNY)?

At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from one quarter earlier. By comparison, 36 hedge funds held shares or bullish call options in SBNY a year ago. So, let’s find out 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 Signature Bank (NASDAQ:SBNY), with a stake worth $108.6 million reported as of the end of September. Trailing Citadel Investment Group was First Pacific Advisors LLC, which amassed a stake valued at $65.6 million. Alyeska Investment Group, AQR Capital Management, and Spindletop Capital 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 Spindletop Capital allocated the biggest weight to Signature Bank (NASDAQ:SBNY), around 21.98% of its 13F portfolio. First Pacific Advisors LLC is also relatively very bullish on the stock, designating 0.92 percent of its 13F equity portfolio to SBNY.

Since Signature Bank (NASDAQ:SBNY) has witnessed falling interest from hedge fund managers, logic holds that there were a few hedge funds that elected to cut their positions entirely last quarter. Interestingly, Renaissance Technologies dumped the largest investment of the 750 funds followed by Insider Monkey, worth about $16 million in stock, and Ravi Chopra’s Azora Capital was right behind this move, as the fund dumped about $12.7 million worth. These transactions are important to note, as total hedge fund interest was cut by 2 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Signature Bank (NASDAQ:SBNY) but similarly valued. These stocks are JBG SMITH Properties (NYSE:JBGS), Portland General Electric Company (NYSE:POR), FLIR Systems, Inc. (NASDAQ:FLIR), and NewMarket Corporation (NYSE:NEU). All of these stocks’ market caps are closest to SBNY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JBGS 20 318961 1
POR 23 247138 -4
FLIR 34 193470 2
NEU 20 143254 -2
Average 24.25 225706 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $226 million. That figure was $262 million in SBNY’s case. FLIR Systems, Inc. (NASDAQ:FLIR) is the most popular stock in this table. On the other hand JBG SMITH Properties (NYSE:JBGS) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Signature Bank (NASDAQ:SBNY) is even less popular than JBGS. Hedge funds clearly dropped the ball on SBNY as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 13.4% in 2020 through June 22nd and still beat the market by 15.9 percentage points. A small number of hedge funds were also right about betting on SBNY as the stock returned 33.2% so far in the second quarter and outperformed the market by an even larger margin.

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