Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don't make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and a 20% drop in stock prices. Things completely reversed in 2019 and stock indices hit record highs. Recent hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Boston Private Financial Hldg Inc (NASDAQ:BPFH) to find out whether it was one of their high conviction long-term ideas.
Hedge fund interest in Boston Private Financial Hldg Inc (NASDAQ:BPFH) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Infinera Corp. (NASDAQ:INFN), Materialise NV (NASDAQ:MTLS), and Re/Max Holdings Inc (NYSE:RMAX) to gather more data points. Our calculations also showed that BPFH isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
[caption id="attachment_140292" align="aligncenter" width="424"] Israel Englander of Millennium Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's take a peek at the latest hedge fund action regarding Boston Private Financial Hldg Inc (NASDAQ:BPFH).
How are hedge funds trading Boston Private Financial Hldg Inc (NASDAQ:BPFH)?
At Q3's end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BPFH over the last 17 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Select Equity Group, managed by Robert Joseph Caruso, holds the biggest position in Boston Private Financial Hldg Inc (NASDAQ:BPFH). Select Equity Group has a $17.7 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Renaissance Technologies, holding a $9.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish encompass Israel Englander's Millennium Management, Mario Gabelli's GAMCO Investors and David E. Shaw's D E Shaw. In terms of the portfolio weights assigned to each position Ulysses Management allocated the biggest weight to Boston Private Financial Hldg Inc (NASDAQ:BPFH), around 0.22% of its 13F portfolio. Select Equity Group is also relatively very bullish on the stock, earmarking 0.12 percent of its 13F equity portfolio to BPFH.
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 Boston Private Financial Hldg Inc (NASDAQ:BPFH). We will take a look at Infinera Corp. (NASDAQ:INFN), Materialise NV (NASDAQ:MTLS), Re/Max Holdings Inc (NYSE:RMAX), and Livent Corporation (NYSE:LTHM). This group of stocks' market values are similar to BPFH's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position INFN,18,175494,7 MTLS,2,9352,0 RMAX,9,91557,-1 LTHM,20,123690,-1 Average,12.25,100023,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $67 million in BPFH's case. Livent Corporation (NYSE:LTHM) is the most popular stock in this table. On the other hand Materialise NV (NASDAQ:MTLS) is the least popular one with only 2 bullish hedge fund positions. Boston Private Financial Hldg Inc (NASDAQ:BPFH) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BPFH wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BPFH were disappointed as the stock returned 1.7% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.