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Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards OceanFirst Financial Corp. (NASDAQ:OCFC) to find out whether there were any major changes in hedge funds' views.
Is OCFC a good stock to buy now? OceanFirst Financial Corp. (NASDAQ:OCFC) has seen an increase in enthusiasm from smart money of late. OceanFirst Financial Corp. (NASDAQ:OCFC) was in 15 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 19. There were 10 hedge funds in our database with OCFC holdings at the end of June. Our calculations also showed that OCFC 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Donald Sussman of Paloma Partners
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. Keeping this in mind let's go over the new hedge fund action encompassing OceanFirst Financial Corp. (NASDAQ:OCFC).
Do Hedge Funds Think OCFC Is A Good Stock To Buy Now?
At Q3's end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards OCFC over the last 21 quarters. With the smart money's sentiment swirling, there exists a few notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of OceanFirst Financial Corp. (NASDAQ:OCFC), with a stake worth $11.9 million reported as of the end of September. Trailing Renaissance Technologies was Royce & Associates, which amassed a stake valued at $8.2 million. Millennium Management, EJF Capital, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Second Curve Capital allocated the biggest weight to OceanFirst Financial Corp. (NASDAQ:OCFC), around 6.33% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, designating 0.2 percent of its 13F equity portfolio to OCFC.
Consequently, key money managers were leading the bulls' herd. ExodusPoint Capital, managed by Michael Gelband, established the most outsized position in OceanFirst Financial Corp. (NASDAQ:OCFC). ExodusPoint Capital had $1.3 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also initiated a $0.3 million position during the quarter. The other funds with brand new OCFC positions are Donald Sussman's Paloma Partners, Thomas Bailard's Bailard Inc, and Greg Eisner's Engineers Gate Manager.
Let's check out hedge fund activity in other stocks similar to OceanFirst Financial Corp. (NASDAQ:OCFC). These stocks are Johnson Outdoors Inc. (NASDAQ:JOUT), Granite Construction Incorporated (NYSE:GVA), Archrock, Inc. (NYSE:AROC), Delek US Holdings, Inc. (NYSE:DK), Mobileiron Inc (NASDAQ:MOBL), BellRing Brands, Inc. (NYSE:BRBR), and Dillard's, Inc. (NYSE:DDS). This group of stocks' market values are similar to OCFC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JOUT,15,91362,2 GVA,14,27374,1 AROC,10,18506,-2 DK,13,155379,-7 MOBL,25,240044,5 BRBR,11,124330,-5 DDS,14,38923,-3 Average,14.6,99417,-1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.6 hedge funds with bullish positions and the average amount invested in these stocks was $99 million. That figure was $36 million in OCFC's case. Mobileiron Inc (NASDAQ:MOBL) is the most popular stock in this table. On the other hand Archrock, Inc. (NYSE:AROC) is the least popular one with only 10 bullish hedge fund positions. OceanFirst Financial Corp. (NASDAQ:OCFC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OCFC is 50.4. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on OCFC as the stock returned 29.3% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.