In this article you are going to find out whether hedge funds think First Community Bancshares Inc (NASDAQ:FCBC) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is First Community Bancshares Inc (NASDAQ:FCBC) ready to rally soon? Prominent investors are taking a pessimistic view. The number of long hedge fund positions fell by 2 lately. Our calculations also showed that FCBC 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.
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 stocks recommended/scorned by legendary Bill Miller. 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. Now let’s take a look at the latest hedge fund action regarding First Community Bancshares Inc (NASDAQ:FCBC).
How have hedgies been trading First Community Bancshares Inc (NASDAQ:FCBC)?
At Q1’s end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from one quarter earlier. On the other hand, there were a total of 4 hedge funds with a bullish position in FCBC a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in First Community Bancshares Inc (NASDAQ:FCBC), which was worth $5.9 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $1.1 million worth of shares. Millennium Management, Winton Capital Management, and PEAK6 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 Winton Capital Management allocated the biggest weight to First Community Bancshares Inc (NASDAQ:FCBC), around 0.02% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to FCBC.
Because First Community Bancshares Inc (NASDAQ:FCBC) has experienced falling interest from the entirety of the hedge funds we track, we can see that there was a specific group of fund managers that slashed their entire stakes in the first quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the largest investment of the 750 funds monitored by Insider Monkey, comprising close to $1.6 million in stock. D. E. Shaw’s fund, D E Shaw, also dumped its stock, about $0.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 2 funds in the first quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as First Community Bancshares Inc (NASDAQ:FCBC) but similarly valued. We will take a look at AxoGen, Inc. (NASDAQ:AXGN), Prevail Therapeutics Inc. (NASDAQ:PRVL), Vericel Corp (NASDAQ:VCEL), and Twin River Worldwide Holdings Inc. (NYSE:TRWH). This group of stocks’ market caps resemble FCBC’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 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $121 million. That figure was $9 million in FCBC’s case. Vericel Corp (NASDAQ:VCEL) is the most popular stock in this table. On the other hand AxoGen, Inc. (NASDAQ:AXGN) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks First Community Bancshares Inc (NASDAQ:FCBC) is even less popular than AXGN. Hedge funds dodged a bullet by taking a bearish stance towards FCBC. 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 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately FCBC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); FCBC investors were disappointed as the stock returned -7.2% during the second quarter (through the end of May) 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.
Disclosure: None. This article was originally published at Insider Monkey.