How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Republic Bancorp, Inc. (NASDAQ:RBCAA).
Republic Bancorp, Inc. (NASDAQ:RBCAA) has experienced a decrease in hedge fund interest recently. Republic Bancorp, Inc. (NASDAQ:RBCAA) was in 4 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 8. There were 5 hedge funds in our database with RBCAA positions at the end of the second quarter. Our calculations also showed that RBCAA 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.
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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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 we’re going to take a gander at the new hedge fund action encompassing Republic Bancorp, Inc. (NASDAQ:RBCAA).
What does smart money think about Republic Bancorp, Inc. (NASDAQ:RBCAA)?
Heading into the fourth quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RBCAA over the last 21 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Tontine Asset Management, managed by Jeffrey Gendell, holds the number one position in Republic Bancorp, Inc. (NASDAQ:RBCAA). Tontine Asset Management has a $2.8 million position in the stock, comprising 0.6% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, which holds a $1.6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish comprise David Harding’s Winton Capital Management, Roger Ibbotson’s Zebra Capital Management and . In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Republic Bancorp, Inc. (NASDAQ:RBCAA), around 0.76% of its 13F portfolio. Tontine Asset Management is also relatively very bullish on the stock, designating 0.58 percent of its 13F equity portfolio to RBCAA.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Royce & Associates. 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 RBCAA as a viable investment and initiated a position in the stock.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Republic Bancorp, Inc. (NASDAQ:RBCAA) but similarly valued. These stocks are Groupon Inc (NASDAQ:GRPN), SpartanNash Company (NASDAQ:SPTN), Ambac Financial Group, Inc. (NYSE:AMBC), HomeStreet Inc (NASDAQ:HMST), Qutoutiao Inc. (NASDAQ:QTT), First Foundation Inc (NASDAQ:FFWM), and El Pollo LoCo Holdings Inc (NASDAQ:LOCO). This group of stocks’ market valuations are closest to RBCAA’s market valuation.
|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 12 hedge funds with bullish positions and the average amount invested in these stocks was $51 million. That figure was $5 million in RBCAA’s case. First Foundation Inc (NASDAQ:FFWM) is the most popular stock in this table. On the other hand Qutoutiao Inc. (NASDAQ:QTT) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Republic Bancorp, Inc. (NASDAQ:RBCAA) is even less popular than QTT. Our overall hedge fund sentiment score for RBCAA is 19. 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. Hedge funds clearly dropped the ball on RBCAA as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on RBCAA as the stock returned 33.2% since Q3 (through November 27th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.