U.S. Markets close in 2 hrs 11 mins

Do Hedge Funds Love Two River Bancorp (TRCB)?

Debasis Saha

We can judge whether Two River Bancorp (NASDAQ:TRCB) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.

Two River Bancorp (NASDAQ:TRCB) was in 5 hedge funds' portfolios at the end of the third quarter of 2019. TRCB investors should pay attention to an increase in activity from the world's largest hedge funds lately. There were 3 hedge funds in our database with TRCB positions at the end of the previous quarter. Our calculations also showed that TRCB 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.

5 Most Popular Stocks Among Hedge Funds

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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/caption]

RENAISSANCE TECHNOLOGIES

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now we're going to take a peek at the latest hedge fund action surrounding Two River Bancorp (NASDAQ:TRCB).

What does smart money think about Two River Bancorp (NASDAQ:TRCB)?

At Q3's end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 67% from the second quarter of 2019. On the other hand, there were a total of 6 hedge funds with a bullish position in TRCB a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

Is TRCB A Good Stock To Buy?

The largest stake in Two River Bancorp (NASDAQ:TRCB) was held by Tudor Investment Corp, which reported holding $10.4 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $2.6 million position. Other investors bullish on the company included Highland Capital Management, Millennium Management, and Springbok Capital. In terms of the portfolio weights assigned to each position Tudor Investment Corp allocated the biggest weight to Two River Bancorp (NASDAQ:TRCB), around 0.36% of its 13F portfolio. Highland Capital Management is also relatively very bullish on the stock, dishing out 0.06 percent of its 13F equity portfolio to TRCB.

Now, key hedge funds have jumped into Two River Bancorp (NASDAQ:TRCB) headfirst. Tudor Investment Corp, managed by Paul Tudor Jones, established the largest position in Two River Bancorp (NASDAQ:TRCB). Tudor Investment Corp had $10.4 million invested in the company at the end of the quarter. James Dondero's Highland Capital Management also initiated a $0.9 million position during the quarter. The only other fund with a brand new TRCB position is Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Two River Bancorp (NASDAQ:TRCB) but similarly valued. We will take a look at United Security Bancshares (NASDAQ:UBFO), CompX International Inc. (NYSE:CIX), MMA Capital Management, LLC (NASDAQ:MMAC), and Pacific Mercantile Bancorp (NASDAQ:PMBC). This group of stocks' market valuations match TRCB's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UBFO,2,8561,0 CIX,4,13261,0 MMAC,1,2177,0 PMBC,4,21727,1 Average,2.75,11432,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 2.75 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $14 million in TRCB's case. CompX International Inc. (NYSE:CIX) is the most popular stock in this table. On the other hand MMA Capital Management, LLC (NASDAQ:MMAC) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Two River Bancorp (NASDAQ:TRCB) is more popular among hedge funds. 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. Unfortunately TRCB wasn't nearly as popular as these 20 stocks and hedge funds that were betting on TRCB were disappointed as the stock returned 3.2% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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

Related Content