We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds' top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like HomeStreet Inc (NASDAQ:HMST).
Is HomeStreet Inc (NASDAQ:HMST) a buy here? The smart money is taking a bearish view. The number of long hedge fund positions retreated by 1 in recent months. Our calculations also showed that HMST isn't among the 30 most popular stocks among hedge funds (see the video below). HMST was in 9 hedge funds' portfolios at the end of the second quarter of 2019. There were 10 hedge funds in our database with HMST holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are several formulas stock traders can use to size up their stock investments. Some of the most innovative formulas are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the best hedge fund managers can beat the market by a very impressive margin (see the details here).
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's analyze the recent hedge fund action regarding HomeStreet Inc (NASDAQ:HMST).
How have hedgies been trading HomeStreet Inc (NASDAQ:HMST)?
At the end of the second quarter, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. On the other hand, there were a total of 7 hedge funds with a bullish position in HMST a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in HomeStreet Inc (NASDAQ:HMST) was held by Renaissance Technologies, which reported holding $7.5 million worth of stock at the end of March. It was followed by D E Shaw with a $3 million position. Other investors bullish on the company included Citadel Investment Group, Lyon Street Capital, and Fisher Asset Management.
Judging by the fact that HomeStreet Inc (NASDAQ:HMST) has faced declining sentiment from the entirety of the hedge funds we track, it's safe to say that there exists a select few fund managers who sold off their positions entirely heading into Q3. Intriguingly, Israel Englander's Millennium Management said goodbye to the biggest investment of the 750 funds watched by Insider Monkey, comprising close to $3.5 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund dumped about $2.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 funds heading into Q3.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as HomeStreet Inc (NASDAQ:HMST) but similarly valued. These stocks are ACCO Brands Corporation (NYSE:ACCO), NetGear, Inc. (NASDAQ:NTGR), Caleres Inc (NYSE:CAL), and M/I Homes Inc (NYSE:MHO). This group of stocks' market values are similar to HMST's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ACCO,16,37871,-2 NTGR,11,11253,-5 CAL,8,41917,-2 MHO,10,57559,-5 Average,11.25,37150,-3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $17 million in HMST's case. ACCO Brands Corporation (NYSE:ACCO) is the most popular stock in this table. On the other hand Caleres Inc (NYSE:CAL) is the least popular one with only 8 bullish hedge fund positions. HomeStreet Inc (NASDAQ:HMST) 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 HMST wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); HMST investors were disappointed as the stock returned -7.8% 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.