Hedge Funds Have Never Been This Bullish On S&T Bancorp, Inc. (STBA)

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of S&T Bancorp, Inc. (NASDAQ:STBA).

Is S&T Bancorp, Inc. (NASDAQ:STBA) worth your attention right now? Money managers are getting more bullish. The number of long hedge fund bets improved by 7 lately. Our calculations also showed that STBA isn’t among the 30 most popular stocks among hedge funds (see the video below). STBA was in 11 hedge funds’ portfolios at the end of the second quarter of 2019. There were 4 hedge funds in our database with STBA positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Paul Marshall Marshall Wace

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a peek at the latest hedge fund action encompassing S&T Bancorp, Inc. (NASDAQ:STBA).

What does smart money think about S&T Bancorp, Inc. (NASDAQ:STBA)?

At Q2’s end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 175% from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in STBA a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

No of Hedge Funds with STBA Positions

The largest stake in S&T Bancorp, Inc. (NASDAQ:STBA) was held by Millennium Management, which reported holding $8.1 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $3.4 million position. Other investors bullish on the company included Arrowstreet Capital, Citadel Investment Group, and Marshall Wace LLP.

Now, some big names were leading the bulls’ herd. Millennium Management, managed by Israel Englander, established the biggest position in S&T Bancorp, Inc. (NASDAQ:STBA). Millennium Management had $8.1 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $2.4 million position during the quarter. The other funds with brand new STBA positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Michael Gelband’s ExodusPoint Capital, and D. E. Shaw’s D E Shaw.

Let’s now take a look at hedge fund activity in other stocks similar to S&T Bancorp, Inc. (NASDAQ:STBA). We will take a look at PBF Logistics LP (NYSE:PBFX), Ferro Corporation (NYSE:FOE), Gibraltar Industries Inc (NASDAQ:ROCK), and Cardtronics plc (NASDAQ:CATM). This group of stocks’ market valuations match STBA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PBFX 3 2502 1
FOE 14 155533 -2
ROCK 10 95650 -4
CATM 19 331653 1
Average 11.5 146335 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $146 million. That figure was $19 million in STBA’s case. Cardtronics plc (NASDAQ:CATM) is the most popular stock in this table. On the other hand PBF Logistics LP (NYSE:PBFX) is the least popular one with only 3 bullish hedge fund positions. S&T Bancorp, Inc. (NASDAQ:STBA) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately STBA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); STBA investors were disappointed as the stock returned -1.8% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.

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