Do Hedge Funds Love Northeast Bank (NBN)?
In this article you are going to find out whether hedge funds think Northeast Bank (NASDAQ:NBN) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Northeast Bank (NASDAQ:NBN) investors should be aware of a decrease in activity from the world's largest hedge funds recently. Northeast Bank (NASDAQ:NBN) was in 4 hedge funds' portfolios at the end of September. The all time high for this statistics is 7. Our calculations also showed that NBN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
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 66 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.
Lawrence Seidman of Seidman Investment Partnership
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 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. Now we're going to take a look at the recent hedge fund action surrounding Northeast Bank (NASDAQ:NBN).
What have hedge funds been doing with Northeast Bank (NASDAQ:NBN)?
Heading into the fourth quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NBN over the last 21 quarters. With hedge funds' sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Basswood Capital, managed by Matthew Lindenbaum, holds the number one position in Northeast Bank (NASDAQ:NBN). Basswood Capital has a $11.5 million position in the stock, comprising 1% of its 13F portfolio. Sitting at the No. 2 spot of Renaissance Technologies, with a $5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers that are bullish include Michael Price's MFP Investors, Lawrence Seidman's Seidman Investment Partnership and . In terms of the portfolio weights assigned to each position Seidman Investment Partnership allocated the biggest weight to Northeast Bank (NASDAQ:NBN), around 1.35% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, earmarking 0.96 percent of its 13F equity portfolio to NBN.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Castine Capital Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified NBN as a viable investment and initiated a position in the stock.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Northeast Bank (NASDAQ:NBN) but similarly valued. These stocks are Silvercrest Asset Management Group Inc (NASDAQ:SAMG), Timberland Bancorp, Inc. (NASDAQ:TSBK), Penn Virginia Corporation (NASDAQ:PVAC), Ramaco Resources, Inc. (NASDAQ:METC), Tsakos Energy Navigation Ltd. (NYSE:TNP), Horizon Global Corp (NYSE:HZN), and Ayala Pharmaceuticals, Inc. (NASDAQ:AYLA). This group of stocks' market values are similar to NBN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SAMG,3,8376,0 TSBK,4,18156,1 PVAC,9,25550,-2 METC,6,2809,-3 TNP,4,11320,-5 HZN,3,16612,0 AYLA,3,10125,-1 Average,4.6,13278,-1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.6 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $22 million in NBN's case. Penn Virginia Corporation (NASDAQ:PVAC) is the most popular stock in this table. On the other hand Silvercrest Asset Management Group Inc (NASDAQ:SAMG) is the least popular one with only 3 bullish hedge fund positions. Northeast Bank (NASDAQ:NBN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NBN is 29.5. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on NBN as the stock returned 20.2% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
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