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Were Hedge Funds Right About Dumping ConnectOne Bancorp Inc (CNOB)?

Reymerlyn Martin

After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of December 31. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards ConnectOne Bancorp Inc (NASDAQ:CNOB).

ConnectOne Bancorp Inc (NASDAQ:CNOB) was in 12 hedge funds' portfolios at the end of December. CNOB has experienced a decrease in enthusiasm from smart money lately. There were 15 hedge funds in our database with CNOB holdings at the end of the previous quarter. Our calculations also showed that CNOB isn't among the 30 most popular stocks among hedge funds.

To most investors, hedge funds are perceived as underperforming, old financial vehicles of the past. While there are greater than 8000 funds trading at present, Our experts choose to focus on the aristocrats of this group, approximately 750 funds. Most estimates calculate that this group of people orchestrate the lion's share of the smart money's total capital, and by tracking their inimitable investments, Insider Monkey has brought to light many investment strategies that have historically beaten Mr. Market. Insider Monkey's flagship hedge fund strategy outpaced the S&P 500 index by nearly 5 percentage points per annum since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

Matthew Lindenbaum Basswood Capital

We're going to take a look at the recent hedge fund action surrounding ConnectOne Bancorp Inc (NASDAQ:CNOB).

How are hedge funds trading ConnectOne Bancorp Inc (NASDAQ:CNOB)?

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 -20% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in CNOB 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.

CNOB_may2019

Among these funds, Renaissance Technologies held the most valuable stake in ConnectOne Bancorp Inc (NASDAQ:CNOB), which was worth $19.3 million at the end of the fourth quarter. On the second spot was Basswood Capital which amassed $6 million worth of shares. Moreover, Millennium Management, Seidman Investment Partnership, and Mendon Capital Advisors were also bullish on ConnectOne Bancorp Inc (NASDAQ:CNOB), allocating a large percentage of their portfolios to this stock.

Due to the fact that ConnectOne Bancorp Inc (NASDAQ:CNOB) has faced falling interest from the entirety of the hedge funds we track, it's easy to see that there exists a select few hedgies who were dropping their positions entirely last quarter. Interestingly, Emanuel J. Friedman's EJF Capital dumped the biggest stake of the "upper crust" of funds tracked by Insider Monkey, valued at close to $2.4 million in stock. Paul Magidson, Jonathan Cohen. And Ostrom Enders's fund, Castine Capital Management, also sold off its stock, about $0.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds last quarter.

Let's go over hedge fund activity in other stocks similar to ConnectOne Bancorp Inc (NASDAQ:CNOB). We will take a look at Live Oak Bancshares Inc (NASDAQ:LOB), US Concrete Inc (NASDAQ:USCR), Unisys Corporation (NYSE:UIS), and El Pollo LoCo Holdings Inc (NASDAQ:LOCO). This group of stocks' market valuations resemble CNOB's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LOB,11,29993,3 USCR,18,58528,-1 UIS,17,96581,3 LOCO,16,29208,2 Average,15.5,53578,1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $44 million in CNOB's case. US Concrete Inc (NASDAQ:USCR) is the most popular stock in this table. On the other hand Live Oak Bancshares Inc (NASDAQ:LOB) is the least popular one with only 11 bullish hedge fund positions. ConnectOne Bancorp Inc (NASDAQ:CNOB) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately CNOB wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); CNOB investors were disappointed as the stock returned 10.5% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

Disclosure: None. This article was originally published at Insider Monkey.

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