Is Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Hedge fund interest in Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare PEBK to other stocks including Rockwell Medical Inc (NASDAQ:RMTI), Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE), and AcelRx Pharmaceuticals Inc (NASDAQ:ACRX) to get a better sense of its popularity. Video: Click the image to 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 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 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.
We're going to check out the new hedge fund action regarding Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK).
How have hedgies been trading Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK)?
Heading into the fourth quarter of 2019, a total of 2 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 2 hedge funds with a bullish position in PEBK 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.
Among these funds, Tontine Asset Management held the most valuable stake in Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK), which was worth $14.8 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $1.6 million worth of shares.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the second quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's go over hedge fund activity in other stocks similar to Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK). We will take a look at Rockwell Medical Inc (NASDAQ:RMTI), Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE), AcelRx Pharmaceuticals Inc (NASDAQ:ACRX), and Hi-Crush Inc. (NYSE:HCR). This group of stocks' market values match PEBK's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RMTI,5,1021,-6 ZYNE,4,7852,1 ACRX,5,2657,-1 HCR,3,2694,0 Average,4.25,3556,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.25 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $16 million in PEBK's case. Rockwell Medical Inc (NASDAQ:RMTI) is the most popular stock in this table. On the other hand Hi-Crush Inc. (NYSE:HCR) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK) is even less popular than HCR. Hedge funds dodged a bullet by taking a bearish stance towards PEBK. Our calculations showed that the top 20 most popular hedge fund stocks returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately PEBK wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); PEBK investors were disappointed as the stock returned 2% during the fourth quarter (through 11/22) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.