We know that hedge funds generate strong, risk-adjusted returns over the long term. Therefore, emulating the choices they are collectively optimistic about can be a profitable strategy for retail investors. With billions of dollars in assets, smart investors must perform complex analysis, spend many resources, and use tools that are not always available to the general public. That’s not to say they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is always a good idea to keep an eye on hedge fund activity. With that in mind, as the current round of 13F deposits just ended, let’s take a look at smart money sentiment towards Fifth Third Bancorp (NASDAQ:FITB).

East Fifth Third Bancorp (NASDAQ:FITB) a purchase, a sale or a conservation? Smart money was taking a bullish view. The number of bullish bets on hedge funds has increased by 3 in recent months. Fifth Third Bancorp (NASDAQ:FITB) was in 41 hedge fund portfolios at the end of the second quarter of 2021. The all-time high for this statistic is 43. Our calculations have also shown that FITB is not among the 30 most popular stocks among hedge funds (click for Q2 ranking).

So why do we pay attention to hedge fund sentiment before making investment decisions? Our research has shown that small cap hedge fund stock selection managed to beat the market by double digits every year between 1999 and 2016, but the margin for outperformance has shrunk in recent years. Nonetheless, we were still able to identify in advance a select group of hedge funds that have outperformed S&P 500 ETFs by more than 79 percentage points since March 2017 (see details here). We have been able to outperform passive index funds by tracking corporate and hedge fund insider movements, and we believe small investors can benefit greatly from reading hedge fund investor letters and records. 13F.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

At Insider Monkey, we scour multiple sources to uncover the next big investing idea. For example, we like undervalued growth stocks that are positive for EBITDA, so we are looking at pitches like this emerging biotechnology stocks. We go through lists like the 10 best EV stocks to choose the next Tesla which will offer a 10x return. Even though we only recommend positions in a tiny fraction of the companies we analyze, we check as many stocks as possible. We read letters from hedge fund investors and listen to equity pitches at hedge fund conferences. You can subscribe to our free daily newsletter at our home page. Now let’s take a look at the recent hedge fund action regarding Fifth Third Bancorp (NASDAQ:FITB).

Do hedge funds think FITB is a good stock to buy now?

As we approach the third quarter of 2021, a total of 41 of the hedge funds tracked by Insider Monkey were long on this stock, a change of 8% from the first quarter of 2020. Below you can see the development of the sentiment of hedge funds towards FITB over the past 24 quarters. So let’s take a look at which hedge funds were among the top stock holders and which hedge funds were making big moves.

The largest stake in Fifth Third Bancorp (NASDAQ: FITB) was held by Pzena Investment Management, which said it held $ 65.6 million in shares at the end of June. It was followed by Adage Capital Management with a position of $ 57.7 million. Other bullish investors for the company included Holocene Advisors, Schonfeld Strategic Advisors and Citadel Investment Group. In terms of portfolio weights assigned to each position Hourglass capital assigned the greatest weight to Fifth Third Bancorp (NASDAQ: FITB), around 3.09% of its 13F portfolio. McKinley Capital Management is also relatively very bullish on the stock, distributing 0.72% of its 13F equity portfolio to FITB.

As interest from across the industry grew, major hedge funds jumped head first into Fifth Third Bancorp (NASDAQ: FITB). McKinley Capital Management, established the largest position in Fifth Third Bancorp (NASDAQ: FITB). McKinley Capital Management had $ 10.2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace Marshall wace srl also initiated a position of $ 6.4 million during the quarter. Other funds with new equity positions are DE Shaw from DE Shaw, Marc Lisker, Glenn Fuhrman and John Phelan’s MSDC management, and TwinBeech Capital of Jinghua Yan.

Now let’s review hedge fund activity in other stocks – not necessarily in the same industry as Fifth Third Bancorp (NASDAQ: FITB) but of similar value. These stocks are Alexandria Real Estate Equities Inc (NYSE:ARE), Rogers Communications Inc. (NYSE:RCI), Sirius XM Holdings Inc (NASDAQ:SIRI), Genmab A / S (NASDAQ:GMAB), Ball Corporation (NYSE:BLL), West Pharmaceutical Services Inc. (NYSE:WST) and RingCentral Inc (NYSE:RNG). The market caps of this group of stocks are similar to the market cap of FITB.

[table] Ticker, number of HF with positions, total value of HF positions (x1000), change of position HF ARE, 28.583759.1 RCI, 17.357300, -1 SIRI, 26.577536.2 GMAB, 9.116722, – 4 BLL, 44.1570958.6 WST, 31.562904.5 RNG, 47.3285023, -4 Medium, 28.9.1007743,0.7 [/table]

See the table here if you have formatting problems.

As you can see, these stocks had an average of 28.9 hedge funds with bullish positions and the average amount invested in these stocks was $ 1,008 million. That figure was $ 360 million in the case of FITB. RingCentral Inc (NYSE:RNG) is the most popular action in this table. On the other hand Genmab A / S (NASDAQ:GMAB) is the least popular with only 9 bullish hedge fund positions. Fifth Third Bancorp (NASDAQ: FITB) isn’t the most popular stock in this group, but hedge fund interest is still above average. Our overall hedge fund sentiment score for FITB is 78.7. Stocks with a 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 have shown 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 21.8% in 2021 through October 11 and have consistently beaten the market by 4.4 percentage points. Hedge funds were also right to bet on FITB, as the stock has returned 14.5% since the end of the second quarter (through 10/11) and has outperformed the market. Hedge funds have been rewarded for their relative optimism.

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Disclosure: none. This article originally appeared on Monkey initiate.


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