“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on First Commonwealth Financial Corporation (NYSE:FCF) in order to identify whether reputable and successful top money managers continue to believe in its potential.
First Commonwealth Financial Corporation (NYSE:FCF) has seen a decrease in support from the world’s most elite money managers in recent months. Our calculations also showed that FCF isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ken Griffin of Citadel Investment Group
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a glance at the key hedge fund action encompassing First Commonwealth Financial Corporation (NYSE:FCF).
What does smart money think about First Commonwealth Financial Corporation (NYSE:FCF)?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in FCF a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in First Commonwealth Financial Corporation (NYSE:FCF), which was worth $18 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $4.4 million worth of shares. D E Shaw, Arrowstreet Capital, and PDT Partners 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 PDT Partners allocated the biggest weight to First Commonwealth Financial Corporation (NYSE:FCF), around 0.1% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, earmarking 0.03 percent of its 13F equity portfolio to FCF.
Seeing as First Commonwealth Financial Corporation (NYSE:FCF) has witnessed declining sentiment from hedge fund managers, we can see that there was a specific group of fund managers who were dropping their full holdings by the end of the third quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace dumped the largest stake of the “upper crust” of funds monitored by Insider Monkey, valued at close to $1.1 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund cut about $0.4 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 1 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as First Commonwealth Financial Corporation (NYSE:FCF) but similarly valued. We will take a look at Scholastic Corporation (NASDAQ:SCHL), Cooper Tire & Rubber Company (NYSE:CTB), Green Dot Corporation (NYSE:GDOT), and Aimmune Therapeutics Inc (NASDAQ:AIMT). All of these stocks’ market caps resemble FCF’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SCHL | 16 | 78029 | 2 |
| CTB | 18 | 135042 | 3 |
| GDOT | 20 | 192467 | 2 |
| AIMT | 20 | 192504 | 7 |
| Average | 18.5 | 149511 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $150 million. That figure was $31 million in FCF’s case. Green Dot Corporation (NYSE:GDOT) is the most popular stock in this table. On the other hand Scholastic Corporation (NASDAQ:SCHL) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks First Commonwealth Financial Corporation (NYSE:FCF) is even less popular than SCHL. 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. A small number of hedge funds were also right about betting on FCF, though not to the same extent, as the stock returned 7.7% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
