The Insider Monkey team has completed processing the quarterly 13F filings for the June quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Flagstar Bancorp Inc (NYSE:FBC).
Is Flagstar Bancorp Inc (NYSE:FBC) a bargain? Hedge funds were taking a bearish view. The number of long hedge fund bets shrunk by 3 recently. Flagstar Bancorp Inc (NYSE:FBC) was in 25 hedge funds' portfolios at the end of June. The all time high for this statistic is 28. Our calculations also showed that FBC isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 28 hedge funds in our database with FBC positions at the end of the first quarter.
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 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 79 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.
Gavin Saitowitz of Prelude Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we're going to take a glance at the recent hedge fund action surrounding Flagstar Bancorp Inc (NYSE:FBC).
Do Hedge Funds Think FBC Is A Good Stock To Buy Now?
At Q2's end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in FBC a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Tudor Investment Corp was the largest shareholder of Flagstar Bancorp Inc (NYSE:FBC), with a stake worth $46.4 million reported as of the end of June. Trailing Tudor Investment Corp was Arrowstreet Capital, which amassed a stake valued at $39.1 million. Basswood Capital, D E Shaw, and Alpine Associates were 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 Steamboat Capital Partners allocated the biggest weight to Flagstar Bancorp Inc (NYSE:FBC), around 2.04% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, earmarking 1.63 percent of its 13F equity portfolio to FBC.
Because Flagstar Bancorp Inc (NYSE:FBC) has faced a decline in interest from hedge fund managers, it's easy to see that there is a sect of hedge funds who sold off their full holdings in the second quarter. At the top of the heap, Richard Mashaal's Rima Senvest Management sold off the largest position of the "upper crust" of funds followed by Insider Monkey, valued at an estimated $47.3 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also dropped its stock, about $12.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 3 funds in the second quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Flagstar Bancorp Inc (NYSE:FBC) but similarly valued. We will take a look at Innospec Inc. (NASDAQ:IOSP), E2open Parent Holdings, Inc. (NYSE:ETWO), DouYu International Holdings Limited (NASDAQ:DOYU), LexinFintech Holdings Ltd. (NASDAQ:LX), WSFS Financial Corporation (NASDAQ:WSFS), Golden Ocean Group Ltd (NASDAQ:GOGL), and TowneBank (NASDAQ:TOWN). All of these stocks' market caps are similar to FBC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IOSP,14,114676,5 ETWO,35,1095327,0 DOYU,25,231115,-4 LX,12,64778,1 WSFS,11,69307,1 GOGL,15,133392,4 TOWN,10,42337,1 Average,17.4,250133,1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.4 hedge funds with bullish positions and the average amount invested in these stocks was $250 million. That figure was $268 million in FBC's case. E2open Parent Holdings, Inc. (NYSE:ETWO) is the most popular stock in this table. On the other hand TowneBank (NASDAQ:TOWN) is the least popular one with only 10 bullish hedge fund positions. Flagstar Bancorp Inc (NYSE:FBC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FBC is 58.8. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on FBC as the stock returned 30.7% since the end of Q2 (through 10/22) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.