Is M&T Bank Corporation (MTB) Going to Burn These Hedge Funds?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards M&T Bank Corporation (NYSE:MTB).

Is M&T Bank Corporation (NYSE:MTB) a healthy stock for your portfolio? The best stock pickers were becoming more confident. The number of long hedge fund positions moved up by 3 recently. M&T Bank Corporation (NYSE:MTB) was in 36 hedge funds’ portfolios at the end of March. The all time high for this statistic is 42. Our calculations also showed that MTB isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 33 hedge funds in our database with MTB holdings at the end of December.

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 115 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, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to check out the fresh hedge fund action encompassing M&T Bank Corporation (NYSE:MTB).

Do Hedge Funds Think MTB Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in MTB a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

More specifically, Select Equity Group was the largest shareholder of M&T Bank Corporation (NYSE:MTB), with a stake worth $154.9 million reported as of the end of March. Trailing Select Equity Group was Citadel Investment Group, which amassed a stake valued at $114.4 million. Adage Capital Management, AQR Capital Management, and Balyasny Asset 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 L2 Asset Management allocated the biggest weight to M&T Bank Corporation (NYSE:MTB), around 1.83% of its 13F portfolio. BlueMar Capital Management is also relatively very bullish on the stock, earmarking 1.59 percent of its 13F equity portfolio to MTB.

Now, key hedge funds have been driving this bullishness. Select Equity Group, managed by Robert Joseph Caruso, assembled the biggest position in M&T Bank Corporation (NYSE:MTB). Select Equity Group had $154.9 million invested in the company at the end of the quarter. Brian Ashford-Russell and Tim Woolley’s Polar Capital also made a $4.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Seuss’s Prana Capital Management, Brandon Haley’s Holocene Advisors, and Michael Gelband’s ExodusPoint Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as M&T Bank Corporation (NYSE:MTB) but similarly valued. These stocks are Teleflex Incorporated (NYSE:TFX), KB Financial Group, Inc. (NYSE:KB), IAC/InterActiveCorp (NASDAQ:IAC), KeyCorp (NYSE:KEY), Hologic, Inc. (NASDAQ:HOLX), ZoomInfo Technologies Inc. (NASDAQ:ZI), and Halliburton Company (NYSE:HAL). All of these stocks’ market caps are closest to MTB’s market cap.

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As you can see these stocks had an average of 32.9 hedge funds with bullish positions and the average amount invested in these stocks was $734 million. That figure was $671 million in MTB’s case. IAC/InterActiveCorp (NASDAQ:IAC) is the most popular stock in this table. On the other hand KB Financial Group, Inc. (NYSE:KB) is the least popular one with only 9 bullish hedge fund positions. M&T Bank Corporation (NYSE:MTB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MTB is 58.7. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and beat the market again by 4.8 percentage points. Unfortunately MTB wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MTB were disappointed as the stock returned 0.5% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.