In this article we will take a look at whether hedge funds think First Citizens BancShares Inc. (NASDAQ:FCNCA) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is FCNCA a good stock to buy now? First Citizens BancShares Inc. (NASDAQ:FCNCA) has experienced an increase in hedge fund sentiment recently. First Citizens BancShares Inc. (NASDAQ:FCNCA) was in 21 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 23. There were 15 hedge funds in our database with FCNCA positions at the end of the second quarter. Our calculations also showed that FCNCA isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 66 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 scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s take a peek at the recent hedge fund action surrounding First Citizens BancShares Inc. (NASDAQ:FCNCA).
Do Hedge Funds Think FCNCA Is A Good Stock To Buy Now?
At the end of September, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 40% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in FCNCA a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in First Citizens BancShares Inc. (NASDAQ:FCNCA) was held by Royce & Associates, which reported holding $34.9 million worth of stock at the end of September. It was followed by AQR Capital Management with a $19.9 million position. Other investors bullish on the company included Basswood Capital, Arrowstreet Capital, and Winton Capital Management. In terms of the portfolio weights assigned to each position Huber Capital Management allocated the biggest weight to First Citizens BancShares Inc. (NASDAQ:FCNCA), around 1.3% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, earmarking 0.4 percent of its 13F equity portfolio to FCNCA.
As industrywide interest jumped, key hedge funds have jumped into First Citizens BancShares Inc. (NASDAQ:FCNCA) headfirst. EJF Capital, managed by Emanuel J. Friedman, initiated the largest position in First Citizens BancShares Inc. (NASDAQ:FCNCA). EJF Capital had $1.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $1 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, D. E. Shaw’s D E Shaw, and Peter Muller’s PDT Partners.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as First Citizens BancShares Inc. (NASDAQ:FCNCA) but similarly valued. We will take a look at Perspecta Inc. (NYSE:PRSP), Rapid7 Inc (NASDAQ:RPD), Synovus Financial Corp. (NYSE:SNV), Clean Harbors Inc (NYSE:CLH), MasTec, Inc. (NYSE:MTZ), Overstock.com, Inc. (NASDAQ:OSTK), and Covetrus, Inc. (NASDAQ:CVET). This group of stocks’ market valuations match FCNCA’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 26.7 hedge funds with bullish positions and the average amount invested in these stocks was $273 million. That figure was $87 million in FCNCA’s case. Perspecta Inc. (NYSE:PRSP) is the most popular stock in this table. On the other hand Rapid7 Inc (NASDAQ:RPD) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks First Citizens BancShares Inc. (NASDAQ:FCNCA) is even less popular than RPD. Our overall hedge fund sentiment score for FCNCA is 37.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds clearly dropped the ball on FCNCA as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on FCNCA as the stock returned 86.7% since Q3 (through December 14th) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.