Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in FVCBankcorp, Inc. (NASDAQ:FVCB)? The smart money sentiment can provide an answer to this question.
FVCBankcorp, Inc. (NASDAQ:FVCB) has seen a decrease in support from the world’s most elite money managers in recent months. FVCBankcorp, Inc. (NASDAQ:FVCB) was in 3 hedge funds’ portfolios at the end of September. The all time high for this statistics is 6. Our calculations also showed that FVCB isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 66 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. 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. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s take a look at the latest hedge fund action regarding FVCBankcorp, Inc. (NASDAQ:FVCB).
What does smart money think about FVCBankcorp, Inc. (NASDAQ:FVCB)?
Heading into the fourth quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from one quarter earlier. By comparison, 3 hedge funds held shares or bullish call options in FVCB a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Among these funds, Elizabeth Park Capital Management held the most valuable stake in FVCBankcorp, Inc. (NASDAQ:FVCB), which was worth $3.2 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $0.2 million worth of shares. Millennium Management was also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Elizabeth Park Capital Management allocated the biggest weight to FVCBankcorp, Inc. (NASDAQ:FVCB), around 2.08% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.0002 percent of its 13F equity portfolio to FVCB.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Fourthstone LLC. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified FVCB as a viable investment and initiated a position in the stock.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as FVCBankcorp, Inc. (NASDAQ:FVCB) but similarly valued. We will take a look at Leaf Group Ltd (NYSE:LEAF), Contura Energy, Inc. (NYSE:CTRA), DIRTT Environmental Solutions Ltd. (NASDAQ:DRTT), GSI Technology, Inc. (NASDAQ:GSIT), Nano Dimension Ltd. (NASDAQ:NNDM), Bel Fuse, Inc. (NASDAQ:BELFB), and Radcom Ltd. (NASDAQ:RDCM). This group of stocks’ market values are closest to FVCB’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.6 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $3 million in FVCB’s case. Contura Energy, Inc. (NYSE:CTRA) is the most popular stock in this table. On the other hand Nano Dimension Ltd. (NASDAQ:NNDM) is the least popular one with only 2 bullish hedge fund positions. FVCBankcorp, Inc. (NASDAQ:FVCB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FVCB is 22.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on FVCB as the stock returned 29% since the end of the third quarter (through 11/23) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.