"The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak," are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Bridge Bancorp, Inc. (NASDAQ:BDGE) and see how it was affected.
Bridge Bancorp, Inc. (NASDAQ:BDGE) was in 10 hedge funds' portfolios at the end of the second quarter of 2019. BDGE has seen a decrease in support from the world's most elite money managers lately. There were 11 hedge funds in our database with BDGE holdings at the end of the previous quarter. Our calculations also showed that BDGE isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to 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' 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Let's take a look at the recent hedge fund action encompassing Bridge Bancorp, Inc. (NASDAQ:BDGE).
What have hedge funds been doing with Bridge Bancorp, Inc. (NASDAQ:BDGE)?
At Q2's end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards BDGE over the last 16 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Matthew Lindenbaum's Basswood Capital has the number one position in Bridge Bancorp, Inc. (NASDAQ:BDGE), worth close to $64.6 million, accounting for 4% of its total 13F portfolio. Sitting at the No. 2 spot is Ulysses Management, led by Joshua Nash, holding a $11.2 million position; 1% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that are bullish comprise Renaissance Technologies, Israel Englander's Millennium Management and Paul Magidson, Jonathan Cohen. And Ostrom Enders's Castine Capital Management.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Diamond Hill Capital. 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 BDGE 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 Bridge Bancorp, Inc. (NASDAQ:BDGE) but similarly valued. We will take a look at Energy Recovery, Inc. (NASDAQ:ERII), TransMedics Group, Inc. (NASDAQ:TMDX), Photronics, Inc. (NASDAQ:PLAB), and Venator Materials PLC (NYSE:VNTR). All of these stocks' market caps are similar to BDGE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ERII,10,50526,1 TMDX,7,108449,7 PLAB,17,65899,4 VNTR,18,68364,0 Average,13,73310,3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $96 million in BDGE's case. Venator Materials PLC (NYSE:VNTR) is the most popular stock in this table. On the other hand TransMedics Group, Inc. (NASDAQ:TMDX) is the least popular one with only 7 bullish hedge fund positions. Bridge Bancorp, Inc. (NASDAQ:BDGE) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately BDGE wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BDGE investors were disappointed as the stock returned 1.1% during the third 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.