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Hedge funds don't get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don't realize is that 100% of the passive funds didn't see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In this article we will take a closer look at the smart money sentiment towards Meridian Interstate Bancorp, Inc. (NASDAQ:EBSB).
Meridian Interstate Bancorp, Inc. (NASDAQ:EBSB) has experienced an increase in activity from the world's largest hedge funds lately. EBSB was in 12 hedge funds' portfolios at the end of the fourth quarter of 2019. There were 11 hedge funds in our database with EBSB holdings at the end of the previous quarter. Our calculations also showed that EBSB isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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David E. Shaw of D.E. Shaw[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to analyze the latest hedge fund action surrounding Meridian Interstate Bancorp, Inc. (NASDAQ:EBSB).
How are hedge funds trading Meridian Interstate Bancorp, Inc. (NASDAQ:EBSB)?
At the end of the fourth quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in EBSB a year ago. With the smart money's sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Meridian Interstate Bancorp, Inc. (NASDAQ:EBSB), with a stake worth $44.9 million reported as of the end of September. Trailing Renaissance Technologies was Impax Asset Management, which amassed a stake valued at $21.3 million. Arrowstreet Capital, D E Shaw, and Royce & Associates 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 MFP Investors allocated the biggest weight to Meridian Interstate Bancorp, Inc. (NASDAQ:EBSB), around 0.28% of its 13F portfolio. Impax Asset Management is also relatively very bullish on the stock, dishing out 0.24 percent of its 13F equity portfolio to EBSB.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls' herd. Millennium Management, managed by Israel Englander, established the most valuable position in Meridian Interstate Bancorp, Inc. (NASDAQ:EBSB). Millennium Management had $2.1 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also initiated a $1.1 million position during the quarter. The only other fund with a new position in the stock is Michael Gelband's ExodusPoint Capital.
Let's also examine hedge fund activity in other stocks similar to Meridian Interstate Bancorp, Inc. (NASDAQ:EBSB). We will take a look at HeadHunter Group PLC (NASDAQ:HHR), TiVo Corporation (NASDAQ:TIVO), QEP Resources Inc (NYSE:QEP), and Cornerstone Building Brands, Inc. (NYSE:CNR). This group of stocks' market caps are similar to EBSB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HHR,6,62887,-2 TIVO,26,102564,3 QEP,23,194024,2 CNR,26,114336,8 Average,20.25,118453,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $118 million. That figure was $95 million in EBSB's case. TiVo Corporation (NASDAQ:TIVO) is the most popular stock in this table. On the other hand HeadHunter Group PLC (NASDAQ:HHR) is the least popular one with only 6 bullish hedge fund positions. Meridian Interstate Bancorp, Inc. (NASDAQ:EBSB) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately EBSB wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); EBSB investors were disappointed as the stock returned -42.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.