We can judge whether The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) has seen a decrease in activity from the world’s largest hedge funds lately. NTB was in 15 hedge funds’ portfolios at the end of the first quarter of 2019. There were 16 hedge funds in our database with NTB holdings at the end of the previous quarter. Our calculations also showed that ntb isn’t among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Paul Marshall of Marshall Wace
Let’s take a gander at the key hedge fund action encompassing The Bank of N.T. Butterfield & Son Limited (NYSE:NTB).
How are hedge funds trading The Bank of N.T. Butterfield & Son Limited (NYSE:NTB)?
At Q1’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the fourth quarter of 2018. By comparison, 13 hedge funds held shares or bullish call options in NTB a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Southpoint Capital Advisors, managed by John Smith Clark, holds the largest position in The Bank of N.T. Butterfield & Son Limited (NYSE:NTB). Southpoint Capital Advisors has a $72 million position in the stock, comprising 3.1% of its 13F portfolio. The second most bullish fund manager is Two Sigma Advisors, managed by John Overdeck and David Siegel, which holds a $12.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors with similar optimism comprise Chuck Royce’s Royce & Associates, D. E. Shaw’s D E Shaw and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Because The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) has witnessed declining sentiment from hedge fund managers, it’s easy to see that there was a specific group of money managers that slashed their full holdings by the end of the third quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management sold off the largest stake of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $2.2 million in stock. Minhua Zhang’s fund, Weld Capital Management, also sold off its stock, about $1.5 million worth. These transactions are interesting, as total hedge fund interest dropped by 1 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) but similarly valued. These stocks are Retail Opportunity Investments Corp (NASDAQ:ROIC), Otter Tail Corporation (NASDAQ:OTTR), Alamos Gold Inc (NYSE:AGI), and United Community Banks Inc (NASDAQ:UCBI). This group of stocks’ market values are closest to NTB’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ROIC | 8 | 57661 | -2 |
| OTTR | 10 | 72052 | -2 |
| AGI | 12 | 136451 | 1 |
| UCBI | 15 | 54356 | 1 |
| Average | 11.25 | 80130 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $128 million in NTB’s case. United Community Banks Inc (NASDAQ:UCBI) is the most popular stock in this table. On the other hand Retail Opportunity Investments Corp (NASDAQ:ROIC) is the least popular one with only 8 bullish hedge fund positions. The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately NTB wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NTB were disappointed as the stock returned 3.5% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
