Were Hedge Funds Right About M&T Bank Corporation (MTB)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards M&T Bank Corporation (NYSE:MTB) at the end of the first quarter and determine whether the smart money was really smart about this stock.

M&T Bank Corporation (NYSE:MTB) shareholders have witnessed a decrease in hedge fund interest lately. Our calculations also showed that MTB isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

In the 21st century investor’s toolkit there are numerous gauges market participants employ to size up publicly traded companies. Some of the most underrated gauges are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the elite fund managers can beat the broader indices by a healthy margin (see the details here).

hedge funds vs. mutual funds

Warren Buffett of Berkshire Hathaway

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind we’re going to take a look at the key hedge fund action encompassing M&T Bank Corporation (NYSE:MTB).

How are hedge funds trading M&T Bank Corporation (NYSE:MTB)?

Heading into the second quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -34% from one quarter earlier. By comparison, 36 hedge funds held shares or bullish call options in MTB a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Berkshire Hathaway, managed by Warren Buffett, holds the largest position in M&T Bank Corporation (NYSE:MTB). Berkshire Hathaway has a $556.7 million position in the stock, comprising 0.3% of its 13F portfolio. On Berkshire Hathaway’s heels is AQR Capital Management, led by Cliff Asness, holding a $46.1 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining professional money managers that hold long positions comprise Bernard Horn’s Polaris Capital Management, John Overdeck and David Siegel’s Two Sigma Advisors and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Polaris Capital Management allocated the biggest weight to M&T Bank Corporation (NYSE:MTB), around 1.5% of its 13F portfolio. Berkshire Hathaway is also relatively very bullish on the stock, dishing out 0.32 percent of its 13F equity portfolio to MTB.

Seeing as M&T Bank Corporation (NYSE:MTB) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there is a sect of fund managers that decided to sell off their entire stakes by the end of the first quarter. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management sold off the largest stake of the “upper crust” of funds watched by Insider Monkey, totaling close to $51.6 million in stock. Daniel Johnson’s fund, Gillson Capital, also said goodbye to its stock, about $36.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 11 funds by the end of the first quarter.

Let’s now review 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 W.W. Grainger, Inc. (NYSE:GWW), CDW Corporation (NASDAQ:CDW), Deutsche Bank Aktiengesellschaft (NYSE:DB), and BioNTech SE (NASDAQ:BNTX). This group of stocks’ market values are closest to MTB’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GWW 26 345842 -3
CDW 36 947126 6
DB 12 916383 0
BNTX 6 37923 2
Average 20 561819 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $562 million. That figure was $687 million in MTB’s case. CDW Corporation (NASDAQ:CDW) is the most popular stock in this table. On the other hand BioNTech SE (NASDAQ:BNTX) is the least popular one with only 6 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. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but beat the market by 17.1 percentage points. Unfortunately MTB wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MTB were disappointed as the stock returned 0.5% during the same time 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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