We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Banc of California, Inc. (NYSE:BANC).
Banc of California, Inc. (NYSE:BANC) has seen a decrease in hedge fund sentiment lately. Our calculations also showed that BANC 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.
To most investors, hedge funds are perceived as worthless, outdated investment tools of years past. While there are over 8000 funds in operation at the moment, We look at the top tier of this club, around 750 funds. It is estimated that this group of investors handle the lion's share of the smart money's total capital, and by keeping an eye on their best equity investments, Insider Monkey has discovered several investment strategies that have historically surpassed the market. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_758440" align="aligncenter" width="450"] Michael Price of MFP Investors[/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 look at the key hedge fund action encompassing Banc of California, Inc. (NYSE:BANC).
How have hedgies been trading Banc of California, Inc. (NYSE:BANC)?
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BANC over the last 17 quarters. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in Banc of California, Inc. (NYSE:BANC) was held by EJF Capital, which reported holding $23.8 million worth of stock at the end of September. It was followed by MFP Investors with a $18.9 million position. Other investors bullish on the company included Forest Hill Capital, Renaissance Technologies, and Seidman Investment Partnership. In terms of the portfolio weights assigned to each position Seidman Investment Partnership allocated the biggest weight to Banc of California, Inc. (NYSE:BANC), around 6.42% of its 13F portfolio. Second Curve Capital is also relatively very bullish on the stock, dishing out 4.22 percent of its 13F equity portfolio to BANC.
Because Banc of California, Inc. (NYSE:BANC) has witnessed declining sentiment from the aggregate hedge fund industry, it's easy to see that there is a sect of money managers that elected to cut their full holdings heading into Q4. Interestingly, Hoon Kim's Quantinno Capital dropped the largest investment of all the hedgies monitored by Insider Monkey, worth an estimated $0.3 million in stock. Frederick DiSanto's fund, Ancora Advisors, also cut its stock, about $0.3 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 1 funds heading into Q4.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Banc of California, Inc. (NYSE:BANC) but similarly valued. We will take a look at Conn's, Inc. (NASDAQ:CONN), Mobileiron Inc (NASDAQ:MOBL), AK Steel Holding Corporation (NYSE:AKS), and Costamare Inc (NYSE:CMRE). This group of stocks' market valuations match BANC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CONN,16,133657,-5 MOBL,17,127698,0 AKS,13,27000,-1 CMRE,11,26252,1 Average,14.25,78652,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $85 million in BANC's case. Mobileiron Inc (NASDAQ:MOBL) is the most popular stock in this table. On the other hand Costamare Inc (NYSE:CMRE) is the least popular one with only 11 bullish hedge fund positions. Banc of California, Inc. (NYSE:BANC) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on BANC, though not to the same extent, as the stock returned 8.6% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.