Does Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Is Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) a buy here? Prominent investors are selling. The number of bullish hedge fund bets fell by 3 lately. Our calculations also showed that PPBI isn't among the 30 most popular stocks among hedge funds (see the video below). 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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 review the key hedge fund action surrounding Pacific Premier Bancorp, Inc. (NASDAQ:PPBI).
How are hedge funds trading Pacific Premier Bancorp, Inc. (NASDAQ:PPBI)?
At Q2's end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from the previous quarter. By comparison, 10 hedge funds held shares or bullish call options in PPBI a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, Cardinal Capital held the most valuable stake in Pacific Premier Bancorp, Inc. (NASDAQ:PPBI), which was worth $37.4 million at the end of the second quarter. On the second spot was Millennium Management which amassed $18.2 million worth of shares. Moreover, Basswood Capital, Polar Capital, and Citadel Investment Group were also bullish on Pacific Premier Bancorp, Inc. (NASDAQ:PPBI), allocating a large percentage of their portfolios to this stock.
Since Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) has experienced declining sentiment from the smart money, we can see that there exists a select few money managers who were dropping their positions entirely by the end of the second quarter. It's worth mentioning that Paul Marshall and Ian Wace's Marshall Wace LLP dumped the largest position of all the hedgies monitored by Insider Monkey, totaling about $1.2 million in stock. Michael Gelband's fund, ExodusPoint Capital, also dropped its stock, about $0.8 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 3 funds by the end of the second quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) but similarly valued. These stocks are Advanced Drainage Systems, Inc. (NYSE:WMS), Four Corners Property Trust, Inc. (NYSE:FCPT), NovaGold Resources Inc. (NYSE:NG), and Comfort Systems USA, Inc. (NYSE:FIX). This group of stocks' market caps are similar to PPBI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WMS,17,325568,0 FCPT,21,108307,8 NG,10,206617,-3 FIX,23,102393,-5 Average,17.75,185721,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $186 million. That figure was $78 million in PPBI's case. Comfort Systems USA, Inc. (NYSE:FIX) is the most popular stock in this table. On the other hand NovaGold Resources Inc. (NYSE:NG) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) is even less popular than NG. Hedge funds dodged a bullet by taking a bearish stance towards PPBI. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately PPBI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); PPBI investors were disappointed as the stock returned 1.7% 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.