The market has been volatile in the fourth quarter as the Federal Reserve continued its rate hikes to normalize the interest rates. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, and the funds' movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of Hope Bancorp, Inc. (NASDAQ:HOPE) and find out how it is affected by hedge funds' moves.
Why do we pay any attention at all to hedge fund sentiment? 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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to view the new hedge fund action encompassing Hope Bancorp, Inc. (NASDAQ:HOPE).
How are hedge funds trading Hope Bancorp, Inc. (NASDAQ:HOPE)?
At the end of the fourth quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from the second quarter of 2018. On the other hand, there were a total of 14 hedge funds with a bullish position in HOPE a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Pzena Investment Management held the most valuable stake in Hope Bancorp, Inc. (NASDAQ:HOPE), which was worth $35.5 million at the end of the fourth quarter. On the second spot was GAMCO Investors which amassed $7 million worth of shares. Moreover, Renaissance Technologies, Marshall Wace LLP, and Arrowstreet Capital were also bullish on Hope Bancorp, Inc. (NASDAQ:HOPE), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, some big names have been driving this bullishness. Renaissance Technologies, managed by Jim Simons, created the biggest position in Hope Bancorp, Inc. (NASDAQ:HOPE). Renaissance Technologies had $4.5 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also made a $1.7 million investment in the stock during the quarter. The other funds with brand new HOPE positions are Ken Griffin's Citadel Investment Group, Jeffrey Talpins's Element Capital Management, and Bruce Kovner's Caxton Associates LP.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Hope Bancorp, Inc. (NASDAQ:HOPE) but similarly valued. We will take a look at SJW Group (NYSE:SJW), Verra Mobility Corporation (NASDAQ:VRRM), Flagstar Bancorp Inc (NYSE:FBC), and Vicor Corp (NASDAQ:VICR). All of these stocks' market caps resemble HOPE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SJW,20,175605,9 VRRM,13,132441,-4 FBC,12,106657,-3 VICR,15,48779,-1 Average,15,115871,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $116 million. That figure was $59 million in HOPE's case. SJW Group (NYSE:SJW) is the most popular stock in this table. On the other hand Flagstar Bancorp Inc (NYSE:FBC) is the least popular one with only 12 bullish hedge fund positions. Hope Bancorp, Inc. (NASDAQ:HOPE) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately HOPE wasn't nearly as popular as these 15 stock and hedge funds that were betting on HOPE were disappointed as the stock returned 13.5% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
How to Best Use Insider Monkey To Increase Your Returns
Billionaire Ken Fisher’s Top Dividend Stock Picks
30 Stocks Billionaires Are Crazy About: Insider Monkey Billionaire Stock Index