Hedge Funds Souring On Republic First Bancorp, Inc. (NASDAQ:FRBK)

Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.6% in 2019 (through the end of November) and outperformed the broader market benchmark by 9.9 percentage points. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is Republic First Bancorp, Inc. (NASDAQ:FRBK) a buy here? Investors who are in the know are in a pessimistic mood. The number of bullish hedge fund positions were trimmed by 1 in recent months. Our calculations also showed that FRBK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). FRBK was in 5 hedge funds’ portfolios at the end of September. There were 6 hedge funds in our database with FRBK 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.

According to most shareholders, hedge funds are viewed as slow, old financial tools of years past. While there are over 8000 funds trading at present, Our researchers hone in on the elite of this group, about 750 funds. These investment experts command the bulk of the hedge fund industry’s total asset base, and by watching their highest performing stock picks, Insider Monkey has deciphered several investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update.


Israel Englander of Millennium Management

We leave no stone unturned when looking for the next great investment idea. For example, Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind, we’re going to analyze the key hedge fund action regarding Republic First Bancorp, Inc. (NASDAQ:FRBK).

How have hedgies been trading Republic First Bancorp, Inc. (NASDAQ:FRBK)?

At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FRBK over the last 17 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Is Republic First Bancorp, Inc. (NASDAQ:FRBK) Going to Burn These Hedge Funds?

The largest stake in Republic First Bancorp, Inc. (NASDAQ:FRBK) was held by Renaissance Technologies, which reported holding $2.8 million worth of stock at the end of September. It was followed by Millennium Management with a $1.1 million position. Other investors bullish on the company included Citadel Investment Group, Winton Capital Management, and D E Shaw. In terms of the portfolio weights assigned to each position, Winton Capital Management allocated the biggest weight to Republic First Bancorp, Inc. (NASDAQ:FRBK), around 0.01% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.0024 percent of its 13F equity portfolio to FRBK.

Because Republic First Bancorp, Inc. (NASDAQ:FRBK) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedgies that decided to sell off their full holdings in the third quarter. Interestingly, Matthew Lindenbaum’s Basswood Capital dumped the largest investment of the “upper crust” of funds tracked by Insider Monkey, worth close to $2.3 million in stock, and Cliff Asness’s AQR Capital Management was right behind this move, as the fund cut about $0.1 million worth. These moves are intriguing, to say the least, as total hedge fund interest fell by 1 fund in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Republic First Bancorp, Inc. (NASDAQ:FRBK). These stocks are Moneygram International Inc (NYSE:MGI), PDL BioPharma Inc. (NASDAQ:PDLI), American Realty Investors, Inc. (NYSE:ARL), and Kandi Technologies Corp. (NASDAQ:KNDI). All of these stocks’ market caps match FRBK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MGI 10 15716 -3
PDLI 17 43582 4
ARL 1 569 0
KNDI 3 1747 0
Average 7.75 15404 0.25

View the table here if you experience formatting issues.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $6 million in FRBK’s case. PDL BioPharma Inc. (NASDAQ:PDLI) is the most popular stock in this table. On the other hand, American Realty Investors, Inc. (NYSE:ARL) is the least popular one with only 1 bullish hedge fund position. Republic First Bancorp, Inc. (NASDAQ:FRBK) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately, FRBK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FRBK investors were disappointed as the stock returned -5.7% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.

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