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In this article we will check out the progression of hedge fund sentiment towards Eagle Bancorp Montana Inc (NASDAQ:EBMT) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Hedge fund interest in Eagle Bancorp Montana Inc (NASDAQ:EBMT) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that EBMT 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 Asure Software Inc (NASDAQ:ASUR), Evans Bancorp Inc. (NYSE:EVBN), and DHI Group Inc. (NYSE:DHX) 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.
Fred DiSanto of Ancora 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 15 best blue chip stocks 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. With all of this in mind we're going to check out the key hedge fund action regarding Eagle Bancorp Montana Inc (NASDAQ:EBMT).
How are hedge funds trading Eagle Bancorp Montana Inc (NASDAQ:EBMT)?
At the end of September, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 3 hedge funds with a bullish position in EBMT a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, EJF Capital was the largest shareholder of Eagle Bancorp Montana Inc (NASDAQ:EBMT), with a stake worth $6.2 million reported as of the end of September. Trailing EJF Capital was Renaissance Technologies, which amassed a stake valued at $1.8 million. Fourthstone LLC, Minerva Advisors, and Ancora Advisors 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 Fourthstone LLC allocated the biggest weight to Eagle Bancorp Montana Inc (NASDAQ:EBMT), around 0.64% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, designating 0.51 percent of its 13F equity portfolio to EBMT.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's also examine hedge fund activity in other stocks similar to Eagle Bancorp Montana Inc (NASDAQ:EBMT). These stocks are Asure Software Inc (NASDAQ:ASUR), Evans Bancorp Inc. (NYSE:EVBN), DHI Group Inc. (NYSE:DHX), Saga Communications, Inc. (NYSE:SGA), Aviat Networks Inc (NASDAQ:AVNW), ObsEva SA (NASDAQ:OBSV), and County Bancorp, Inc. (NASDAQ:ICBK). This group of stocks' market caps are closest to EBMT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ASUR,5,17355,-4 EVBN,4,1376,0 DHX,11,30855,-3 SGA,3,10874,0 AVNW,5,27577,0 OBSV,6,17950,-5 ICBK,3,3672,-1 Average,5.3,15666,-1.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.3 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $9 million in EBMT's case. DHI Group Inc. (NYSE:DHX) is the most popular stock in this table. On the other hand Saga Communications, Inc. (NYSE:SGA) is the least popular one with only 3 bullish hedge fund positions. Eagle Bancorp Montana Inc (NASDAQ:EBMT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EBMT is 36.3. 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 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 EBMT as the stock returned 17.8% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.