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Were Hedge Funds Right About Souring On First Bancorp (FBNC)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards First Bancorp (NASDAQ:FBNC) and determine whether hedge funds skillfully traded this stock.

First Bancorp (NASDAQ:FBNC) has seen a decrease in hedge fund sentiment lately. Our calculations also showed that FBNC 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 many formulas investors have at their disposal to evaluate their holdings. Some of the most underrated formulas are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can outpace their index-focused peers by a healthy amount (see the details here).

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 most profitable companies in the world to identify emerging companies that are likely to deliver 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Now let’s review the latest hedge fund action surrounding First Bancorp (NASDAQ:FBNC).

What does smart money think about First Bancorp (NASDAQ:FBNC)?

At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FBNC over the last 18 quarters. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Is FBNC A Good Stock To Buy?

According to Insider Monkey’s hedge fund database, Renaissance Technologies,  holds the number one position in First Bancorp (NASDAQ:FBNC). Renaissance Technologies has a $9.5 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Anton Schutz of Mendon Capital Advisors, with a $8.2 million position; the fund has 4% of its 13F portfolio invested in the stock. Remaining peers that hold long positions comprise Mark Lee’s Forest Hill Capital, Israel Englander’s Millennium Management and Paul Magidson, Jonathan Cohen. And Ostrom Enders’s Castine Capital Management. In terms of the portfolio weights assigned to each position Mendon Capital Advisors allocated the biggest weight to First Bancorp (NASDAQ:FBNC), around 4.01% of its 13F portfolio. Forest Hill Capital is also relatively very bullish on the stock, earmarking 3.57 percent of its 13F equity portfolio to FBNC.

Since First Bancorp (NASDAQ:FBNC) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there were a few fund managers who were dropping their full holdings last quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the largest investment of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $1.1 million in stock. Minhua Zhang’s fund, Weld Capital Management, also dropped its stock, about $0.3 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 1 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to First Bancorp (NASDAQ:FBNC). These stocks are BellRing Brands, Inc. (NYSE:BRBR), Patrick Industries, Inc. (NASDAQ:PATK), Upland Software Inc (NASDAQ:UPLD), and Qiwi PLC (NASDAQ:QIWI). All of these stocks’ market caps resemble FBNC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BRBR 15 135847 -1
PATK 13 50010 -5
UPLD 17 143956 -5
QIWI 11 42137 1
Average 14 92988 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $93 million. That figure was $43 million in FBNC’s case. Upland Software Inc (NASDAQ:UPLD) is the most popular stock in this table. On the other hand Qiwi PLC (NASDAQ:QIWI) is the least popular one with only 11 bullish hedge fund positions. First Bancorp (NASDAQ:FBNC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately FBNC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); FBNC investors were disappointed as the stock returned 2.6% during the second quarter 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 most of these stocks already outperformed the market in 2020.

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