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With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Sierra Bancorp (NASDAQ:BSRR).
Is BSRR a good stock to buy now? Hedge fund interest in Sierra Bancorp (NASDAQ:BSRR) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that BSRR 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). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as W&T Offshore, Inc. (NYSE:WTI), MOGU Inc. (NYSE:MOGU), and Limoneira Company (NASDAQ:LMNR) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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. With all of this in mind let's take a peek at the fresh hedge fund action surrounding Sierra Bancorp (NASDAQ:BSRR).
Hedge fund activity in Sierra Bancorp (NASDAQ:BSRR)
At Q3's end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in BSRR a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Renaissance Technologies, holds the biggest position in Sierra Bancorp (NASDAQ:BSRR). Renaissance Technologies has a $5.9 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $0.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions comprise David Harding's Winton Capital Management, Ken Griffin's Citadel Investment Group and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position Winton Capital Management allocated the biggest weight to Sierra Bancorp (NASDAQ:BSRR), around 0.02% of its 13F portfolio. Bailard Inc is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to BSRR.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Engineers Gate Manager. 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 only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Arrowstreet Capital).
Let's now take a look at hedge fund activity in other stocks similar to Sierra Bancorp (NASDAQ:BSRR). We will take a look at W&T Offshore, Inc. (NYSE:WTI), MOGU Inc. (NYSE:MOGU), Limoneira Company (NASDAQ:LMNR), Denison Mines Corp (NYSE:DNN), Whitestone REIT (NYSE:WSR), Liquidity Services, Inc. (NASDAQ:LQDT), and Radiant Logistics, Inc. (NYSE:RLGT). This group of stocks' market valuations are similar to BSRR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WTI,8,12428,-7 MOGU,6,29948,4 LMNR,2,679,-3 DNN,6,4815,2 WSR,8,9493,-1 LQDT,14,26500,5 RLGT,14,11973,4 Average,8.3,13691,0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.3 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $9 million in BSRR's case. Liquidity Services, Inc. (NASDAQ:LQDT) is the most popular stock in this table. On the other hand Limoneira Company (NASDAQ:LMNR) is the least popular one with only 2 bullish hedge fund positions. Sierra Bancorp (NASDAQ:BSRR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BSRR is 61.2. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on BSRR as the stock returned 43.9% since the end of Q3 (through 12/8) 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.