Is S&T Bancorp (STBA) A Good Stock To Buy Now?

After several tireless days we have finished crunching the numbers from nearly 817 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards S & T Bancorp Inc (NASDAQ:STBA).

Is S&T Bancorp (STBA) a good stock to buy now? STBA shareholders have witnessed a decrease in hedge fund interest lately. S & T Bancorp Inc (NASDAQ:STBA) was in 5 hedge funds’ portfolios at the end of September. The all time high for this statistics is 11. Our calculations also showed that STBA 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Michael Gelband of ExodusPoint Capital

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. Now we’re going to analyze the fresh hedge fund action regarding S & T Bancorp Inc (NASDAQ:STBA).

How are hedge funds trading S & T Bancorp Inc (NASDAQ:STBA)?

At Q3’s end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in STBA over the last 21 quarters. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Among these funds, Citadel Investment Group held the most valuable stake in S & T Bancorp Inc (NASDAQ:STBA), which was worth $1.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $1.1 million worth of shares. Tudor Investment Corp, ExodusPoint Capital, and Two Sigma Advisors 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 Tudor Investment Corp allocated the biggest weight to S & T Bancorp Inc (NASDAQ:STBA), around 0.02% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to STBA.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified STBA as a viable investment and initiated a position in the stock.

Let’s check out hedge fund activity in other stocks similar to S & T Bancorp Inc (NASDAQ:STBA). These stocks are Codexis, Inc. (NASDAQ:CDXS), Personalis, Inc. (NASDAQ:PSNL), Stratasys, Ltd. (NASDAQ:SSYS), Echo Global Logistics, Inc. (NASDAQ:ECHO), Great Western Bancorp Inc (NYSE:GWB), PBF Energy Inc (NYSE:PBF), and PDF Solutions, Inc. (NASDAQ:PDFS). This group of stocks’ market caps are similar to STBA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CDXS 13 149244 0
PSNL 11 50609 3
SSYS 16 57470 -3
ECHO 14 33553 1
GWB 14 28097 -4
PBF 16 68594 -1
PDFS 10 16132 -3
Average 13.4 57671 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.4 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $4 million in STBA’s case. Stratasys, Ltd. (NASDAQ:SSYS) is the most popular stock in this table. On the other hand PDF Solutions, Inc. (NASDAQ:PDFS) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks S & T Bancorp Inc (NASDAQ:STBA) is even less popular than PDFS. Our overall hedge fund sentiment score for STBA is 17.6. 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 STBA 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 November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on STBA as the stock returned 34.2% since Q3 (through November 27th) and outperformed the market by an even larger margin.

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