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Were Hedge Funds Right About Piling Into FB Financial Corporation (FBK)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded FB Financial Corporation (NYSE:FBK) and determine whether the smart money was really smart about this stock.

FB Financial Corporation (NYSE:FBK) investors should be aware of an increase in activity from the world’s largest hedge funds in recent months. FBK was in 11 hedge funds’ portfolios at the end of the first quarter of 2020. There were 5 hedge funds in our database with FBK holdings at the end of the previous quarter. Our calculations also showed that FBK 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s view the new hedge fund action surrounding FB Financial Corporation (NYSE:FBK).

What have hedge funds been doing with FB Financial Corporation (NYSE:FBK)?

At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 120% from the fourth quarter of 2019. On the other hand, there were a total of 5 hedge funds with a bullish position in FBK a year ago. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

The largest stake in FB Financial Corporation (NYSE:FBK) was held by Mendon Capital Advisors, which reported holding $18.6 million worth of stock at the end of September. It was followed by Cardinal Capital with a $14.4 million position. Other investors bullish on the company included Renaissance Technologies, Balyasny Asset Management, and Fourthstone LLC. In terms of the portfolio weights assigned to each position Mendon Capital Advisors allocated the biggest weight to FB Financial Corporation (NYSE:FBK), around 9.15% of its 13F portfolio. Cardinal Capital is also relatively very bullish on the stock, setting aside 0.71 percent of its 13F equity portfolio to FBK.

As aggregate interest increased, some big names were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the largest position in FB Financial Corporation (NYSE:FBK). Balyasny Asset Management had $0.5 million invested in the company at the end of the quarter. Phil Stone’s Fourthstone LLC also made a $0.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Peter Muller’s PDT Partners, and John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s check out hedge fund activity in other stocks similar to FB Financial Corporation (NYSE:FBK). We will take a look at The E.W. Scripps Company (NASDAQ:SSP), Standex International Corp. (NYSE:SXI), Molecular Templates, Inc. (NASDAQ:MTEM), and Akero Therapeutics, Inc. (NASDAQ:AKRO). This group of stocks’ market valuations match FBK’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SSP 12 74208 0
SXI 9 20088 -3
MTEM 17 142757 -3
AKRO 14 112061 5
Average 13 87279 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $87 million. That figure was $38 million in FBK’s case. Molecular Templates, Inc. (NASDAQ:MTEM) is the most popular stock in this table. On the other hand Standex International Corp. (NYSE:SXI) is the least popular one with only 9 bullish hedge fund positions. FB Financial Corporation (NYSE:FBK) is not the least popular stock in this group but hedge fund interest is still below average. 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on FBK as the stock returned 26.1% during the second quarter and outperformed the market by an even larger margin.

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