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Hedge Funds Have Never Been This Bullish On HarborOne Bancorp, Inc. (HONE)

Nina Todic

Does HarborOne Bancorp, Inc. (NASDAQ:HONE) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

HarborOne Bancorp, Inc. (NASDAQ:HONE) investors should pay attention to an increase in enthusiasm from smart money in recent months. Our calculations also showed that HONE 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' 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 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 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.

[caption id="attachment_221556" align="aligncenter" width="450"] Richard Driehaus of Driehaus Capital[/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. We're going to take a peek at the recent hedge fund action surrounding HarborOne Bancorp, Inc. (NASDAQ:HONE).

What does smart money think about HarborOne Bancorp, Inc. (NASDAQ:HONE)?

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 175% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HONE over the last 17 quarters. With hedgies' capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of HarborOne Bancorp, Inc. (NASDAQ:HONE), with a stake worth $8.1 million reported as of the end of September. Trailing Renaissance Technologies was Royce & Associates, which amassed a stake valued at $4.1 million. Driehaus Capital, Prospector Partners, and Citadel Investment Group 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 Prospector Partners allocated the biggest weight to HarborOne Bancorp, Inc. (NASDAQ:HONE), around 0.43% of its 13F portfolio. GRT Capital Partners is also relatively very bullish on the stock, dishing out 0.22 percent of its 13F equity portfolio to HONE.

As one would reasonably expect, some big names have jumped into HarborOne Bancorp, Inc. (NASDAQ:HONE) headfirst. Renaissance Technologies assembled the largest position in HarborOne Bancorp, Inc. (NASDAQ:HONE). Renaissance Technologies had $8.1 million invested in the company at the end of the quarter. Chuck Royce's Royce & Associates also initiated a $4.1 million position during the quarter. The following funds were also among the new HONE investors: Richard Driehaus's Driehaus Capital, Ken Griffin's Citadel Investment Group, and David Harding's Winton Capital Management.

Let's also examine hedge fund activity in other stocks similar to HarborOne Bancorp, Inc. (NASDAQ:HONE). These stocks are MAG Silver Corp. (NYSE:MAG), Hollysys Automation Technologies Ltd (NASDAQ:HOLI), NGM Biopharmaceuticals, Inc. (NASDAQ:NGM), and ProPetro Holding Corp. (NYSE:PUMP). All of these stocks' market caps resemble HONE's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MAG,12,26911,3 HOLI,13,61301,0 NGM,9,18872,-1 PUMP,22,152253,-2 Average,14,64834,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $24 million in HONE's case. ProPetro Holding Corp. (NYSE:PUMP) is the most popular stock in this table. On the other hand NGM Biopharmaceuticals, Inc. (NASDAQ:NGM) is the least popular one with only 9 bullish hedge fund positions. HarborOne Bancorp, Inc. (NASDAQ:HONE) is not the least popular stock in this group but hedge fund interest is still below average. 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 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 HONE wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); HONE investors were disappointed as the stock returned 5.4% 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.

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