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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Meridian Bancorp, Inc. (NASDAQ:EBSB) based on those filings.
Is EBSB a good stock to buy now? Meridian Bancorp, Inc. (NASDAQ:EBSB) investors should pay attention to a decrease in hedge fund interest lately. Meridian Bancorp, Inc. (NASDAQ:EBSB) was in 14 hedge funds' portfolios at the end of September. The all time high for this statistic is 20. There were 16 hedge funds in our database with EBSB positions at the end of the second quarter. Our calculations also showed that EBSB 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 66 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Chuck Royce of Royce & Associates
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. Now let's review the key hedge fund action regarding Meridian Bancorp, Inc. (NASDAQ:EBSB).
Do Hedge Funds Think EBSB Is A Good Stock To Buy Now?
At Q3's end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the second quarter of 2020. By comparison, 11 hedge funds held shares or bullish call options in EBSB a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the biggest position in Meridian Bancorp, Inc. (NASDAQ:EBSB), worth close to $24.3 million, corresponding to less than 0.1%% of its total 13F portfolio. On Renaissance Technologies's heels is Impax Asset Management, led by Ian Simm, holding a $12.1 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors with similar optimism contain Chuck Royce's Royce & Associates, Israel Englander's Millennium Management and D. E. Shaw's D E Shaw. In terms of the portfolio weights assigned to each position MFP Investors allocated the biggest weight to Meridian Bancorp, Inc. (NASDAQ:EBSB), around 0.19% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, dishing out 0.11 percent of its 13F equity portfolio to EBSB.
Due to the fact that Meridian Bancorp, Inc. (NASDAQ:EBSB) has faced a decline in interest from the aggregate hedge fund industry, we can see that there lies a certain "tier" of hedge funds that elected to cut their positions entirely last quarter. At the top of the heap, Donald Sussman's Paloma Partners dumped the biggest stake of the 750 funds monitored by Insider Monkey, valued at about $0.2 million in stock. Matthew Hulsizer's fund, PEAK6 Capital Management, also dumped its stock, about $0.1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to Meridian Bancorp, Inc. (NASDAQ:EBSB). These stocks are Freeline Therapeutics Holdings plc (NASDAQ:FRLN), Capstead Mortgage Corporation (NYSE:CMO), Geron Corporation (NASDAQ:GERN), Assembly Biosciences Inc (NASDAQ:ASMB), TrueCar Inc (NASDAQ:TRUE), Apollo Investment Corp. (NASDAQ:AINV), and ZIOPHARM Oncology Inc. (NASDAQ:ZIOP). All of these stocks' market caps are similar to EBSB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FRLN,9,29817,9 CMO,15,60667,2 GERN,16,133881,5 ASMB,22,195597,3 TRUE,18,103244,1 AINV,5,21619,-4 ZIOP,13,102366,2 Average,14,92456,2.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $92 million. That figure was $53 million in EBSB's case. Assembly Biosciences Inc (NASDAQ:ASMB) is the most popular stock in this table. On the other hand Apollo Investment Corp. (NASDAQ:AINV) is the least popular one with only 5 bullish hedge fund positions. Meridian Bancorp, Inc. (NASDAQ:EBSB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EBSB is 50.5. 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. A small number of hedge funds were also right about betting on EBSB as the stock returned 40% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.