How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Richmond Mutual Bancorporation, Inc. (NASDAQ:RMBI).
Richmond Mutual Bancorporation, Inc. (NASDAQ:RMBI) has experienced an increase in activity from the world's largest hedge funds in recent months. Our calculations also showed that RMBI isn't among the 30 most popular stocks among hedge funds.
If you'd ask most shareholders, hedge funds are assumed to be underperforming, old financial tools of years past. While there are over 8000 funds trading at the moment, We choose to focus on the leaders of this group, about 750 funds. These investment experts preside over the lion's share of the hedge fund industry's total capital, and by tracking their matchless stock picks, Insider Monkey has revealed a number of investment strategies that have historically outpaced the broader indices. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_735636" align="aligncenter" width="473"] Matthew Lindenbaum of Basswood Capital[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's go over the latest hedge fund action surrounding Richmond Mutual Bancorporation, Inc. (NASDAQ:RMBI).
What have hedge funds been doing with Richmond Mutual Bancorporation, Inc. (NASDAQ:RMBI)?
At Q3's end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3 from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in RMBI over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Richmond Mutual Bancorporation, Inc. (NASDAQ:RMBI) was held by Seidman Investment Partnership, which reported holding $3.2 million worth of stock at the end of September. It was followed by Minerva Advisors with a $0.4 million position. The only other hedge fund that is bullish on the company was Basswood Capital.
As one would reasonably expect, key money managers have jumped into Richmond Mutual Bancorporation, Inc. (NASDAQ:RMBI) headfirst. Seidman Investment Partnership, managed by Lawrence Seidman, created the most valuable position in Richmond Mutual Bancorporation, Inc. (NASDAQ:RMBI). Seidman Investment Partnership had $3.2 million invested in the company at the end of the quarter. David P. Cohen's Minerva Advisors also made a $0.4 million investment in the stock during the quarter. The only other fund with a brand new RMBI position is Matthew Lindenbaum's Basswood Capital.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Richmond Mutual Bancorporation, Inc. (NASDAQ:RMBI) but similarly valued. We will take a look at Lifetime Brands Inc (NASDAQ:LCUT), Energy Fuels Inc (NYSE:UUUU), Unit Corporation (NYSE:UNT), and The Community Financial Corp (NASDAQ:TCFC). This group of stocks' market caps resemble RMBI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LCUT,3,16247,0 UUUU,6,2448,-3 UNT,9,4396,1 TCFC,2,8374,0 Average,5,7866,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $4 million in RMBI's case. Unit Corporation (NYSE:UNT) is the most popular stock in this table. On the other hand The Community Financial Corp (NASDAQ:TCFC) is the least popular one with only 2 bullish hedge fund positions. Richmond Mutual Bancorporation, Inc. (NASDAQ:RMBI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately RMBI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); RMBI investors were disappointed as the stock returned 3.1% 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 in Q4.
Disclosure: None. This article was originally published at Insider Monkey.