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Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about HarborOne Bancorp, Inc. (NASDAQ:HONE).
Is HONE a good stock to buy now? HarborOne Bancorp, Inc. (NASDAQ:HONE) has experienced an increase in activity from the world's largest hedge funds lately. HarborOne Bancorp, Inc. (NASDAQ:HONE) was in 14 hedge funds' portfolios at the end of September. The all time high for this statistic is 13. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 13 hedge funds in our database with HONE positions at the end of the second quarter. Our calculations also showed that HONE isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
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 S&P 500 ETFs by more than 66 percentage points since March 2017 (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 stocks that are in our short portfolio.
Lawrence Seidman of Seidman Investment Partnership
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let's analyze the new hedge fund action regarding HarborOne Bancorp, Inc. (NASDAQ:HONE).
Do Hedge Funds Think HONE Is A Good Stock To Buy Now?
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 8% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in HONE 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.
According to Insider Monkey's hedge fund database, Driehaus Capital, managed by Richard Driehaus, holds the most valuable position in HarborOne Bancorp, Inc. (NASDAQ:HONE). Driehaus Capital has a $6.8 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Renaissance Technologies, with a $4.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions include Chuck Royce's Royce & Associates, John D. Gillespie's Prospector Partners and Lawrence Seidman's Seidman Investment Partnership. In terms of the portfolio weights assigned to each position Seidman Investment Partnership allocated the biggest weight to HarborOne Bancorp, Inc. (NASDAQ:HONE), around 3.89% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, designating 0.46 percent of its 13F equity portfolio to HONE.
As industrywide interest jumped, key hedge funds were leading the bulls' herd. Millennium Management, managed by Israel Englander, established the biggest position in HarborOne Bancorp, Inc. (NASDAQ:HONE). Millennium Management had $1.5 million invested in the company at the end of the quarter. Greg Eisner's Engineers Gate Manager also made a $0.3 million investment in the stock during the quarter. The only other fund with a new position in the stock is John Overdeck and David Siegel's Two Sigma Advisors.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as HarborOne Bancorp, Inc. (NASDAQ:HONE) but similarly valued. We will take a look at Talos Energy, Inc. (NYSE:TALO), Ardelyx Inc (NASDAQ:ARDX), Navigator Holdings Ltd (NYSE:NVGS), Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), AxoGen, Inc. (NASDAQ:AXGN), Applied Therapeutics, Inc. (NASDAQ:APLT), and Brookdale Senior Living, Inc. (NYSE:BKD). All of these stocks' market caps resemble HONE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TALO,8,18051,-6 ARDX,21,180194,-3 NVGS,16,30119,2 CCO,30,121256,3 AXGN,15,43436,3 APLT,8,100284,-6 BKD,20,181384,-4 Average,16.9,96389,-1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.9 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $27 million in HONE's case. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) is the most popular stock in this table. On the other hand Talos Energy, Inc. (NYSE:TALO) is the least popular one with only 8 bullish hedge fund positions. HarborOne Bancorp, Inc. (NASDAQ:HONE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HONE is 49.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on HONE as the stock returned 32% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.