Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Heritage Commerce Corp. (NASDAQ:HTBK) based on that data.
Heritage Commerce Corp. (NASDAQ:HTBK) was in 9 hedge funds' portfolios at the end of March. HTBK has experienced a decrease in activity from the world's largest hedge funds lately. There were 13 hedge funds in our database with HTBK holdings at the end of the previous quarter. Our calculations also showed that HTBK 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 today’s marketplace there are many signals stock traders have at their disposal to analyze publicly traded companies. A duo of the most under-the-radar signals are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the best money managers can trounce the S&P 500 by a healthy amount (see the details here).
[caption id="attachment_745225" align="aligncenter" width="400"] Noam Gottesman of GLG Partners[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let's check out the new hedge fund action regarding Heritage Commerce Corp. (NASDAQ:HTBK).
What does smart money think about Heritage Commerce Corp. (NASDAQ:HTBK)?
At the end of the first quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in HTBK 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.
The largest stake in Heritage Commerce Corp. (NASDAQ:HTBK) was held by Renaissance Technologies, which reported holding $5.2 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $2.8 million position. Other investors bullish on the company included Millennium Management, D E Shaw, and GLG Partners. In terms of the portfolio weights assigned to each position Mendon Capital Advisors allocated the biggest weight to Heritage Commerce Corp. (NASDAQ:HTBK), around 0.18% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, dishing out 0.1 percent of its 13F equity portfolio to HTBK.
Seeing as Heritage Commerce Corp. (NASDAQ:HTBK) has faced declining sentiment from the smart money, it's easy to see that there lies a certain "tier" of fund managers who sold off their entire stakes by the end of the first quarter. It's worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dropped the biggest stake of the 750 funds followed by Insider Monkey, comprising about $4.4 million in stock. Paul Magidson, Jonathan Cohen. And Ostrom Enders's fund, Castine Capital Management, also dumped its stock, about $1 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 4 funds by the end of the first quarter.
Let's now review hedge fund activity in other stocks similar to Heritage Commerce Corp. (NASDAQ:HTBK). These stocks are Apollo Medical Holdings, Inc. (NASDAQ:AMEH), Qudian Inc. (NYSE:QD), Adecoagro SA (NYSE:AGRO), and Diamond Eagle Acquisition Corp. (NASDAQ:DEACU). This group of stocks' market valuations match HTBK's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMEH,4,2310,0 QD,10,15458,-4 AGRO,14,114033,2 DEACU,35,172599,12 Average,15.75,76100,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $76 million. That figure was $15 million in HTBK's case. Diamond Eagle Acquisition Corp. (NASDAQ:DEACU) is the most popular stock in this table. On the other hand Apollo Medical Holdings, Inc. (NASDAQ:AMEH) is the least popular one with only 4 bullish hedge fund positions. Heritage Commerce Corp. (NASDAQ:HTBK) 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 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately HTBK wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); HTBK investors were disappointed as the stock returned -1.8% 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.
Disclosure: None. This article was originally published at Insider Monkey.