We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Boston Private Financial Holdings, Inc. (NASDAQ:BPFH) and determine whether hedge funds skillfully traded this stock.
Is Boston Private Financial Holdings, Inc. (NASDAQ:BPFH) worth your attention right now? The best stock pickers were taking a bullish view. The number of long hedge fund bets advanced by 6 in recent months. Boston Private Financial Holdings, Inc. (NASDAQ:BPFH) was in 20 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 17. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that BPFH isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 14 hedge funds in our database with BPFH positions at the end of the first quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 58 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.
Phil Stone of Fourthstone LLC
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 are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Keeping this in mind let's take a peek at the new hedge fund action encompassing Boston Private Financial Holdings, Inc. (NASDAQ:BPFH).
Hedge fund activity in Boston Private Financial Holdings, Inc. (NASDAQ:BPFH)
At the end of the second quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 43% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BPFH over the last 20 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Boston Private Financial Holdings, Inc. (NASDAQ:BPFH), with a stake worth $5.7 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $3.9 million. GAMCO Investors, Arrowstreet Capital, and D E Shaw 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 Boston Private Financial Holdings, Inc. (NASDAQ:BPFH), around 0.48% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, designating 0.23 percent of its 13F equity portfolio to BPFH.
As industrywide interest jumped, key hedge funds have jumped into Boston Private Financial Holdings, Inc. (NASDAQ:BPFH) headfirst. Millennium Management, managed by Israel Englander, assembled the most valuable position in Boston Private Financial Holdings, Inc. (NASDAQ:BPFH). Millennium Management had $3.9 million invested in the company at the end of the quarter. Phil Stone's Fourthstone LLC also made a $0.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Noam Gottesman's GLG Partners, Hoon Kim's Quantinno Capital, and Benjamin A. Smith's Laurion Capital Management.
Let's now take a look at hedge fund activity in other stocks similar to Boston Private Financial Holdings, Inc. (NASDAQ:BPFH). We will take a look at The Bancorp, Inc. (NASDAQ:TBBK), Denny's Corporation (NASDAQ:DENN), B. Riley Financial, Inc. (NASDAQ:RILY), Luther Burbank Corporation (NASDAQ:LBC), CEL-SCI Corporation (NYSE:CVM), Seanergy Maritime Holdings Corp. (NASDAQ:SHIP), and Wabash National Corporation (NYSE:WNC). This group of stocks' market values are closest to BPFH's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TBBK,14,68372,-1 DENN,23,57055,3 RILY,16,92685,2 LBC,2,2745,-3 CVM,6,16920,1 SHIP,2,46,-1 WNC,15,43926,-1 Average,11.1,40250,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.1 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $29 million in BPFH's case. Denny's Corporation (NASDAQ:DENN) is the most popular stock in this table. On the other hand Luther Burbank Corporation (NASDAQ:LBC) is the least popular one with only 2 bullish hedge fund positions. Boston Private Financial Holdings, Inc. (NASDAQ:BPFH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BPFH is 82.9. 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 positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately BPFH wasn't nearly as popular as these 10 stocks and hedge funds that were betting on BPFH were disappointed as the stock returned -19% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Get real-time email alerts: Follow Boston Private Financial Holdings Inc (NASDAQ:BPFH)
Disclosure: None. This article was originally published at Insider Monkey.