Hedge Funds Souring On Provident Bancorp, Inc. (PVBC)
In this article you are going to find out whether hedge funds think Provident Bancorp, Inc. (NASDAQ:PVBC) 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.
Provident Bancorp, Inc. (NASDAQ:PVBC) has experienced a decrease in enthusiasm from smart money of late. Our calculations also showed that PVBC isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
In the eyes of most traders, hedge funds are assumed to be unimportant, old financial vehicles of the past. While there are over 8000 funds trading at the moment, Our researchers hone in on the masters of this group, about 850 funds. These money managers command most of the smart money's total capital, and by tailing their finest equity investments, Insider Monkey has unsheathed many investment strategies that have historically outperformed the S&P 500 index. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
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Michael Price of MFP Investors[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's take a look at the new hedge fund action surrounding Provident Bancorp, Inc. (NASDAQ:PVBC).
What does smart money think about Provident Bancorp, Inc. (NASDAQ:PVBC)?
At the end of the first quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from one quarter earlier. By comparison, 2 hedge funds held shares or bullish call options in PVBC a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Seidman Investment Partnership held the most valuable stake in Provident Bancorp, Inc. (NASDAQ:PVBC), which was worth $1.7 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $1.3 million worth of shares. Two Sigma Advisors, Royce & Associates, and MFP Investors 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 Seidman Investment Partnership allocated the biggest weight to Provident Bancorp, Inc. (NASDAQ:PVBC), around 2.11% of its 13F portfolio. MFP Investors is also relatively very bullish on the stock, designating 0.1 percent of its 13F equity portfolio to PVBC.
Seeing as Provident Bancorp, Inc. (NASDAQ:PVBC) has witnessed falling interest from the smart money, logic holds that there was a specific group of money managers that elected to cut their entire stakes last quarter. Intriguingly, Paul Magidson, Jonathan Cohen. And Ostrom Enders's Castine Capital Management dropped the largest position of the 750 funds followed by Insider Monkey, worth an estimated $7.7 million in stock, and Israel Englander's Millennium Management was right behind this move, as the fund sold off about $0.2 million worth. These transactions are important to note, as total hedge fund interest dropped by 2 funds last quarter.
Let's go over hedge fund activity in other stocks similar to Provident Bancorp, Inc. (NASDAQ:PVBC). These stocks are Chuy's Holdings Inc (NASDAQ:CHUY), X Financial (NYSE:XYF), Westwood Holdings Group, Inc. (NYSE:WHG), and DermTech, Inc. (NASDAQ:DMTK). This group of stocks' market caps resemble PVBC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CHUY,10,14149,1 XYF,2,415,-1 WHG,9,26136,0 DMTK,5,18775,2 Average,6.5,14869,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $6 million in PVBC's case. Chuy's Holdings Inc (NASDAQ:CHUY) is the most popular stock in this table. On the other hand X Financial (NYSE:XYF) is the least popular one with only 2 bullish hedge fund positions. Provident Bancorp, Inc. (NASDAQ:PVBC) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately PVBC wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PVBC investors were disappointed as the stock returned 5.2% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
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