Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Signature Bank (NASDAQ:SBNY) was in 25 hedge funds’ portfolios at the end of September. SBNY has experienced a decrease in hedge fund interest in recent months. There were 28 hedge funds in our database with SBNY positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Vereit Inc (NYSE:VER), Skechers USA Inc (NYSE:SKX), and Gartner Inc (NYSE:IT) to gather more data points.
Follow Signature Bank New York N Y (NASDAQ:SBNY)
Follow Signature Bank New York N Y (NASDAQ:SBNY)
To the average investor there are tons of methods investors use to size up stocks. A duo of the most under-the-radar methods are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the best hedge fund managers can beat the S&P 500 by a significant amount (see the details here).
With all of this in mind, let’s take a glance at the fresh action surrounding Signature Bank (NASDAQ:SBNY).
How are hedge funds trading Signature Bank (NASDAQ:SBNY)?
Heading into Q4, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the previous quarter. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Sirios Capital Management, managed by John Brennan, holds the biggest position in Signature Bank (NASDAQ:SBNY). Sirios Capital Management has an $90.6 million position in the stock, comprising 3% of its 13F portfolio. Sitting at the No. 2 spot is David Stemerman of Conatus Capital Management, with an $63.3 million position; the fund has 4% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism comprise Ken Griffin’s Citadel Investment Group, Matthew A. Weatherbie’s Weatherbie Capital and Cliff Asness’s AQR Capital Management.
Since Signature Bank (NASDAQ:SBNY) has faced a decline in interest from the smart money, logic holds that there were a few hedge funds that slashed their positions entirely in the third quarter. It’s worth mentioning that Peter Muller’s PDT Partners cut the largest investment of the 700 funds tracked by Insider Monkey, comprising an estimated $4.8 million in stock. Lawrence Sapanski’s fund, Scoria Capital, also cut its stock, about $4.4 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 3 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Signature Bank (NASDAQ:SBNY) but similarly valued. We will take a look at Vereit Inc (NYSE:VER), Skechers USA Inc (NYSE:SKX), Gartner Inc (NYSE:IT), and Williams-Sonoma, Inc. (NYSE:WSM). This group of stocks’ market valuations match SBNY’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VER | 44 | 1477635 | 0 |
| SKX | 36 | 599889 | 6 |
| IT | 16 | 173175 | 2 |
| WSM | 24 | 502868 | -1 |
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $688 million. That figure was $424 million in SBNY’s case. Vereit Inc (NYSE:VER) is the most popular stock in this table. On the other hand Gartner Inc (NYSE:IT) is the least popular one with only 16 bullish hedge fund positions. Signature Bank (NASDAQ:SBNY) 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. In this regard VER might be a better candidate to consider a long position.
