Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the third quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds’ top consensus picks. This year hedge funds’ top 20 stock picks outperformed the S&P 500 Index by 9.9 percentage points through the end of November. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Prudential Bancorp, Inc. (NASDAQ:PBIP) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds’ portfolios at the end of the third quarter of 2019. At the end of this article we will also compare PBIP to other stocks including CB Financial Services, Inc. (NASDAQ:CBFV), Hawthorn Bancshares, Inc. (NASDAQ:HWBK), and Overseas Shipholding Group, Inc. (NYSE:OSG) 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.
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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Michael Price of MFP Investors
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to go over the fresh hedge fund action surrounding Prudential Bancorp, Inc. (NASDAQ:PBIP).
How are hedge funds trading Prudential Bancorp, Inc. (NASDAQ:PBIP)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in PBIP over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Lawrence Seidman’s Seidman Investment Partnership has the largest position in Prudential Bancorp, Inc. (NASDAQ:PBIP), worth close to $13.4 million, comprising 12.2% of its total 13F portfolio. Sitting at the No. 2 spot is Firefly Value Partners, managed by Ryan Heslop and Ariel Warszawski, which holds a $8.1 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions comprise Renaissance Technologies, Michael Price’s MFP Investors and . In terms of the portfolio weights assigned to each position Seidman Investment Partnership allocated the biggest weight to Prudential Bancorp, Inc. (NASDAQ:PBIP), around 12.18% of its 13F portfolio. Firefly Value Partners is also relatively very bullish on the stock, designating 1.24 percent of its 13F equity portfolio to PBIP.
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 third 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 also examine hedge fund activity in other stocks – not necessarily in the same industry as Prudential Bancorp, Inc. (NASDAQ:PBIP) but similarly valued. We will take a look at CB Financial Services, Inc. (NASDAQ:CBFV), Hawthorn Bancshares, Inc. (NASDAQ:HWBK), Overseas Shipholding Group, Inc. (NYSE:OSG), and U.S. Well Services, Inc. (NASDAQ:USWS). This group of stocks’ market caps match PBIP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CBFV | 4 | 3882 | 1 |
| HWBK | 3 | 3766 | 1 |
| OSG | 12 | 38564 | 0 |
| USWS | 13 | 11651 | 2 |
| Average | 8 | 14466 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $31 million in PBIP’s case. U.S. Well Services, Inc. (NASDAQ:USWS) is the most popular stock in this table. On the other hand Hawthorn Bancshares, Inc. (NASDAQ:HWBK) is the least popular one with only 3 bullish hedge fund positions. Prudential Bancorp, Inc. (NASDAQ:PBIP) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately PBIP wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PBIP investors were disappointed as the stock returned 5.8% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
