Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Fifth Third Bancorp (NASDAQ:FITB)? The smart money sentiment can provide an answer to this question.
Fifth Third Bancorp (NASDAQ:FITB) was in 24 hedge funds’ portfolios at the end of the third quarter of 2016. FITB investors should be aware of a decrease in hedge fund sentiment in recent months. There were 27 hedge funds in our database with FITB positions at the end of the previous quarter. At the end of this article we will also compare FITB to other stocks including Lam Research Corporation (NASDAQ:LRCX), EQT Corporation (NYSE:EQT), and Laboratory Corp. of America Holdings (NYSE:LH) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
How are hedge funds trading Fifth Third Bancorp (NASDAQ:FITB)?
At Q3’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, an 11% fall from the second quarter of 2016. Ownership of the stock has been fairly volatile over the past year, with as many as 28 hedgies owning the stock, and as few as 20. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Pzena Investment Management, managed by Richard S. Pzena, holds the largest position in Fifth Third Bancorp (NASDAQ:FITB). Pzena Investment Management has a $79.3 million position in the stock. The second most bullish fund manager is AQR Capital Management, led by Cliff Asness, holding a $56.9 million position. Remaining hedge funds and institutional investors that hold long positions consist of Neil Chriss’ Hutchin Hill Capital, Emanuel J. Friedman’s EJF Capital and David Harding’s Winton Capital Management.
Judging by the fact that Fifth Third Bancorp (NASDAQ:FITB) has faced a decline in interest from the smart money, we can see that there lies a certain “tier” of hedgies that decided to sell off their positions entirely in the third quarter. At the top of the heap, Jim Simons’ Renaissance Technologies sold off the biggest stake of all the hedgies monitored by Insider Monkey, valued at about $26.3 million in stock. Israel Englander’s fund, Millennium Management, also dumped its stock, about $25.4 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 go over hedge fund activity in other stocks similar to Fifth Third Bancorp (NASDAQ:FITB). These stocks are Lam Research Corporation (NASDAQ:LRCX), EQT Corporation (NYSE:EQT), Laboratory Corp. of America Holdings (NYSE:LH), and Markel Corporation (NYSE:MKL). This group of stocks’ market valuations resemble FITB’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $1.35 billion. That figure was $333 million in FITB’s case. Lam Research Corporation (NASDAQ:LRCX) is the most popular stock in this table. On the other hand Markel Corporation (NYSE:MKL) is the least popular one with only 15 bullish hedge fund positions. Fifth Third Bancorp (NASDAQ:FITB) 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 LRCX might be a better candidate to consider for a long position.