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Did Hedge Funds Make The Right Call On Bank of Hawaii Corporation (BOH) ?

Asma UL Husna
·6 mins read

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Bank of Hawaii Corporation (NYSE:BOH) and determine whether hedge funds skillfully traded this stock.

Is Bank of Hawaii Corporation (NYSE:BOH) a healthy stock for your portfolio? Investors who are in the know were getting more bullish. The number of long hedge fund bets advanced by 1 in recent months. Our calculations also showed that BOH isn't among the 30 most popular stocks among hedge funds (click for Q1 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Harding
David Harding

David Harding of Winton Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let's analyze the fresh hedge fund action encompassing Bank of Hawaii Corporation (NYSE:BOH).

Hedge fund activity in Bank of Hawaii Corporation (NYSE:BOH)

At Q1's end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards BOH over the last 18 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Renaissance Technologies held the most valuable stake in Bank of Hawaii Corporation (NYSE:BOH), which was worth $34.6 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $12.4 million worth of shares. Citadel Investment Group, AQR Capital Management, and Winton Capital Management 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 Royce & Associates allocated the biggest weight to Bank of Hawaii Corporation (NYSE:BOH), around 0.17% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, designating 0.15 percent of its 13F equity portfolio to BOH.

As one would reasonably expect, some big names were leading the bulls' herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most outsized position in Bank of Hawaii Corporation (NYSE:BOH). Arrowstreet Capital had $0.9 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also initiated a $0.6 million position during the quarter. The other funds with brand new BOH positions are D. E. Shaw's D E Shaw, Matthew Hulsizer's PEAK6 Capital Management, and Peter Muller's PDT Partners.

Let's now review hedge fund activity in other stocks similar to Bank of Hawaii Corporation (NYSE:BOH). These stocks are National Health Investors Inc (NYSE:NHI), Independent Bank Corp (NASDAQ:INDB), SINA Corp (NASDAQ:SINA), and Mimecast Limited (NASDAQ:MIME). This group of stocks' market caps match BOH's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NHI,13,99642,-2 INDB,4,10050,-10 SINA,13,124514,-5 MIME,39,517022,8 Average,17.25,187807,-2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $188 million. That figure was $75 million in BOH's case. Mimecast Limited (NASDAQ:MIME) is the most popular stock in this table. On the other hand Independent Bank Corp (NASDAQ:INDB) is the least popular one with only 4 bullish hedge fund positions. Bank of Hawaii Corporation (NYSE:BOH) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th and surpassed the market by 17.1 percentage points. Unfortunately BOH wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); BOH investors were disappointed as the stock returned 5.6% since Q1 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.

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