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Should You Buy Nicolet Bankshares Inc. (NCBS)?

Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.6% in 2019 (through the end of November) and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is Nicolet Bankshares Inc. (NASDAQ:NCBS) ready to rally soon? The smart money is taking a bullish view. The number of long hedge fund positions rose by 1 in recent months. Our calculations also showed that NCBS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are a lot of metrics investors employ to grade their stock investments. A duo of the less known metrics are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the elite hedge fund managers can outperform their index-focused peers by a significant amount (see the details here).

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s take a gander at the new hedge fund action surrounding Nicolet Bankshares Inc. (NASDAQ:NCBS).

Hedge fund activity in Nicolet Bankshares Inc. (NASDAQ:NCBS)

Heading into the fourth quarter of 2019, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the second quarter of 2019. By comparison, 4 hedge funds held shares or bullish call options in NCBS 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.

The largest stake in Nicolet Bankshares Inc. (NASDAQ:NCBS) was held by Renaissance Technologies, which reported holding $5.9 million worth of stock at the end of September. It was followed by Winton Capital Management with a $2.8 million position. Other investors bullish on the company included Millennium Management, Two Sigma Advisors, and PDT Partners. In terms of the portfolio weights assigned to each position Winton Capital Management allocated the biggest weight to Nicolet Bankshares Inc. (NASDAQ:NCBS), around 0.03% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to NCBS.

Now, some big names have jumped into Nicolet Bankshares Inc. (NASDAQ:NCBS) headfirst. Winton Capital Management, managed by David Harding, initiated the most outsized position in Nicolet Bankshares Inc. (NASDAQ:NCBS). Winton Capital Management had $2.8 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also made a $0.2 million investment in the stock during the quarter.

Let’s also examine hedge fund activity in other stocks similar to Nicolet Bankshares Inc. (NASDAQ:NCBS). These stocks are Jumia Technologies AG (NYSE:JMIA), Front Yard Residential Corporation (NYSE:RESI), Organogenesis Holdings Inc. (NASDAQ:ORGO), and DBV Technologies SA – ADR (NASDAQ:DBVT). All of these stocks’ market caps match NCBS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JMIA 6 2284 -2
RESI 15 34064 4
ORGO 2 1103 0
DBVT 7 112668 -3
Average 7.5 37530 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $9 million in NCBS’s case. Front Yard Residential Corporation (NYSE:RESI) is the most popular stock in this table. On the other hand Organogenesis Holdings Inc. (NASDAQ:ORGO) is the least popular one with only 2 bullish hedge fund positions. Nicolet Bankshares Inc. (NASDAQ:NCBS) is not the least popular stock in this group but hedge fund interest is still below average. 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 NCBS, though not to the same extent, as the stock returned 8.8% during the first two months of the fourth quarter and outperformed the market.

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

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