Is HomeStreet Inc (NASDAQ:HMST) a good equity to bet on 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.
HomeStreet Inc (NASDAQ:HMST) was in 14 hedge funds' portfolios at the end of September. HMST shareholders have witnessed an increase in hedge fund interest in recent months. There were 9 hedge funds in our database with HMST positions at the end of the previous quarter. Our calculations also showed that HMST isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_365194" align="aligncenter" width="450"] David E. Shaw of D.E. Shaw[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to analyze the key hedge fund action regarding HomeStreet Inc (NASDAQ:HMST).
How are hedge funds trading HomeStreet Inc (NASDAQ:HMST)?
At Q3's end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 56% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in HMST over the last 17 quarters. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
The largest stake in HomeStreet Inc (NASDAQ:HMST) was held by Renaissance Technologies, which reported holding $10.5 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $6 million position. Other investors bullish on the company included Arrowstreet Capital, D E Shaw, and Millennium Management. In terms of the portfolio weights assigned to each position Weld Capital Management allocated the biggest weight to HomeStreet Inc (NASDAQ:HMST), around 0.04% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to HMST.
Now, key hedge funds have been driving this bullishness. Millennium Management, managed by Israel Englander, initiated the biggest position in HomeStreet Inc (NASDAQ:HMST). Millennium Management had $1.5 million invested in the company at the end of the quarter. David Harding's Winton Capital Management also made a $0.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Donald Sussman's Paloma Partners, Paul Marshall and Ian Wace's Marshall Wace, and Paul Tudor Jones's Tudor Investment Corp.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as HomeStreet Inc (NASDAQ:HMST) but similarly valued. We will take a look at Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD), Foundation Building Materials, Inc. (NYSE:FBM), Plug Power, Inc. (NASDAQ:PLUG), and Barrett Business Services, Inc. (NASDAQ:BBSI). This group of stocks' market values are closest to HMST's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GLDD,24,104208,2 FBM,24,74715,14 PLUG,9,44087,1 BBSI,11,76189,0 Average,17,74800,4.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $31 million in HMST's case. Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) is the most popular stock in this table. On the other hand Plug Power, Inc. (NASDAQ:PLUG) is the least popular one with only 9 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on HMST as the stock returned 16.8% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.