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Hedge Funds Are Buying FS Bancorp, Inc. (FSBW)

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The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the first quarter, which unveil their equity positions as of March 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards FS Bancorp, Inc. (NASDAQ:FSBW).

Is FS Bancorp, Inc. (NASDAQ:FSBW) a buy right now? The best stock pickers were turning bullish. The number of bullish hedge fund bets went up by 2 in recent months. FS Bancorp, Inc. (NASDAQ:FSBW) was in 6 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 10. Our calculations also showed that FSBW isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 4 hedge funds in our database with FSBW positions at the end of the fourth quarter.

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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Roger Ibbotson of Zebra Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let's take a peek at the latest hedge fund action encompassing FS Bancorp, Inc. (NASDAQ:FSBW).

Do Hedge Funds Think FSBW Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FSBW over the last 23 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Emanuel J. Friedman's EJF Capital has the largest position in FS Bancorp, Inc. (NASDAQ:FSBW), worth close to $10.9 million, amounting to 0.8% of its total 13F portfolio. On EJF Capital's heels is Renaissance Technologies, with a $5.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions comprise Phil Stone's Fourthstone LLC, Israel Englander's Millennium Management and Roger Ibbotson's Zebra Capital Management. In terms of the portfolio weights assigned to each position Fourthstone LLC allocated the biggest weight to FS Bancorp, Inc. (NASDAQ:FSBW), around 0.84% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, earmarking 0.79 percent of its 13F equity portfolio to FSBW.

As one would reasonably expect, some big names have been driving this bullishness. Millennium Management, managed by Israel Englander, established the largest position in FS Bancorp, Inc. (NASDAQ:FSBW). Millennium Management had $0.3 million invested in the company at the end of the quarter. Roger Ibbotson's Zebra Capital Management also initiated a $0.3 million position during the quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as FS Bancorp, Inc. (NASDAQ:FSBW) but similarly valued. We will take a look at Sterling Bancorp, Inc. (Southfield, MI) (NASDAQ:SBT), Saratoga Investment Corp (NYSE:SAR), Mustang Bio, Inc. (NASDAQ:MBIO), SCVX Corp. (NYSE:SCVX), Decibel Therapeutics, Inc. (NASDAQ:DBTX), Orbital Energy Group, Inc. (NASDAQ:OEG), and Full House Resorts, Inc. (NASDAQ:FLL). This group of stocks' market values resemble FSBW's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SBT,5,2373,-1 SAR,2,3269,-2 MBIO,10,11698,1 SCVX,26,89851,9 DBTX,14,112137,14 OEG,5,1855,2 FLL,21,63227,11 Average,11.9,40630,4.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.9 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $19 million in FSBW's case. SCVX Corp. (NYSE:SCVX) is the most popular stock in this table. On the other hand Saratoga Investment Corp (NYSE:SAR) is the least popular one with only 2 bullish hedge fund positions. FS Bancorp, Inc. (NASDAQ:FSBW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FSBW is 33.3. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and surpassed the market again by 4.8 percentage points. Unfortunately FSBW wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); FSBW investors were disappointed as the stock returned 6.7% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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