The market has been volatile in the last 6 months as the Federal Reserve continued its rate hikes and then abruptly reversed its stance and uncertainty looms over trade negotiations with China. 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 9 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, though some funds increased their exposure dramatically at the end of Q4 and the beginning of Q1. In this article, we analyze what the smart money thinks of Opus Bank (NASDAQ:OPB) and find out how it is affected by hedge funds' moves.
Opus Bank (NASDAQ:OPB) investors should pay attention to an increase in activity from the world's largest hedge funds recently. Our calculations also showed that OPB isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to analyze the key hedge fund action encompassing Opus Bank (NASDAQ:OPB).
How have hedgies been trading Opus Bank (NASDAQ:OPB)?
Heading into the second quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards OPB over the last 15 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.
More specifically, Elliott Management was the largest shareholder of Opus Bank (NASDAQ:OPB), with a stake worth $107.3 million reported as of the end of March. Trailing Elliott Management was Shoals Capital Management, which amassed a stake valued at $7.9 million. Castine Capital Management, Mendon Capital Advisors, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, key hedge funds have jumped into Opus Bank (NASDAQ:OPB) headfirst. Castine Capital Management, managed by Paul Magidson, Jonathan Cohen. And Ostrom Enders, established the most outsized position in Opus Bank (NASDAQ:OPB). Castine Capital Management had $5.7 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also made a $0.4 million investment in the stock during the quarter. The only other fund with a new position in the stock is Ken Griffin's Citadel Investment Group.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Opus Bank (NASDAQ:OPB) but similarly valued. These stocks are HomeStreet Inc (NASDAQ:HMST), JinkoSolar Holding Co., Ltd. (NYSE:JKS), Rudolph Technologies Inc (NYSE:RTEC), and Voyager Therapeutics, Inc. (NASDAQ:VYGR). This group of stocks' market valuations are closest to OPB's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HMST,10,15920,3 JKS,6,5725,0 RTEC,12,82738,-2 VYGR,18,153216,0 Average,11.5,64400,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $64 million. That figure was $135 million in OPB's case. Voyager Therapeutics, Inc. (NASDAQ:VYGR) is the most popular stock in this table. On the other hand JinkoSolar Holding Co., Ltd. (NYSE:JKS) is the least popular one with only 6 bullish hedge fund positions. Opus Bank (NASDAQ:OPB) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on OPB as the stock returned 8% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.