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Do Hedge Funds Love Howard Bancorp Inc (HBMD)?

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·6 min read
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In this article we are going to use hedge fund sentiment as a tool and determine whether Howard Bancorp Inc (NASDAQ:HBMD) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Howard Bancorp Inc (NASDAQ:HBMD) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds' portfolios at the end of the first quarter of 2021. Our calculations also showed that HBMD isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare HBMD to other stocks including CTO Realty Growth Inc (NYSE:CTO), Limoneira Company (NASDAQ:LMNR), and Cresud Sociedad Anonima Comercial, Inmobiliaria, Financiera y Agropecuaria (NASDAQ:CRESY) to get a better sense of its popularity.

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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Anton Schutz of Mendon Capital Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $27 biotech stock for $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 we're going to take a glance at the latest hedge fund action encompassing Howard Bancorp Inc (NASDAQ:HBMD).

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

At first quarter's end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 6 hedge funds with a bullish position in HBMD a year ago. With hedgies' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Mendon Capital Advisors, managed by Anton Schutz, holds the largest position in Howard Bancorp Inc (NASDAQ:HBMD). Mendon Capital Advisors has a $8.7 million position in the stock, comprising 3.2% of its 13F portfolio. The second largest stake is held by Fourthstone LLC, managed by Phil Stone, which holds a $8.6 million position; the fund has 4.3% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish include Fred Cummings's Elizabeth Park Capital Management, Renaissance Technologies and . In terms of the portfolio weights assigned to each position Fourthstone LLC allocated the biggest weight to Howard Bancorp Inc (NASDAQ:HBMD), around 4.29% of its 13F portfolio. Mendon Capital Advisors is also relatively very bullish on the stock, earmarking 3.21 percent of its 13F equity portfolio to HBMD.

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 go over hedge fund activity in other stocks similar to Howard Bancorp Inc (NASDAQ:HBMD). These stocks are CTO Realty Growth Inc (NYSE:CTO), Limoneira Company (NASDAQ:LMNR), Cresud Sociedad Anonima Comercial, Inmobiliaria, Financiera y Agropecuaria (NASDAQ:CRESY), Trilogy Metals Inc. (NYSE:TMQ), Chemomab Therapeutics Ltd. (NASDAQ:CMMB), Lightinthebox Holding Co Ltd (NYSE:LITB), and Ashford Hospitality Trust, Inc. (NYSE:AHT). This group of stocks' market caps are similar to HBMD's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CTO,13,22691,0 LMNR,2,1301,1 CRESY,2,8811,0 TMQ,9,68085,0 CMMB,2,74221,0 LITB,2,5276,-1 AHT,12,13839,5 Average,6,27746,0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $23 million in HBMD's case. CTO Realty Growth Inc (NYSE:CTO) is the most popular stock in this table. On the other hand Limoneira Company (NASDAQ:LMNR) is the least popular one with only 2 bullish hedge fund positions. Howard Bancorp Inc (NASDAQ:HBMD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HBMD is 34.1. 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 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately HBMD wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); HBMD investors were disappointed as the stock returned 2.9% since the end of March (through 6/11) 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.

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