Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 26% in 2019 (through November 22nd). Conversely, hedge funds’ 20 preferred S&P 500 stocks generated a return of nearly 35% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Bank of Commerce Holdings (NASDAQ:BOCH).
Is Bank of Commerce Holdings (NASDAQ:BOCH) a marvelous stock to buy now? Hedge funds are buying. The number of bullish hedge fund bets inched up by 1 lately. Our calculations also showed that BOCH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). BOCH was in 5 hedge funds’ portfolios at the end of the third quarter of 2019. There were 4 hedge funds in our database with BOCH holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most market participants, hedge funds are assumed to be underperforming, old investment vehicles of the past. While there are greater than 8000 funds with their doors open at the moment, Our researchers hone in on the bigwigs of this group, about 750 funds. These money managers command most of the hedge fund industry’s total capital, and by monitoring their highest performing picks, Insider Monkey has come up with numerous investment strategies that have historically beaten the market. Insider Monkey’s flagship short hedge fund strategy surpassed 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 .
Israel Englander of Millennium Management
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. Keeping this in mind let’s check out the key hedge fund action regarding Bank of Commerce Holdings (NASDAQ:BOCH).
How are hedge funds trading Bank of Commerce Holdings (NASDAQ:BOCH)?
At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BOCH over the last 17 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, EJF Capital held the most valuable stake in Bank of Commerce Holdings (NASDAQ:BOCH), which was worth $9.7 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $1.4 million worth of shares. Millennium Management, Bailard Inc, and Arrowstreet Capital 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 EJF Capital allocated the biggest weight to Bank of Commerce Holdings (NASDAQ:BOCH), around 1.31% of its 13F portfolio. Bailard Inc is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to BOCH.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the most valuable position in Bank of Commerce Holdings (NASDAQ:BOCH). Arrowstreet Capital had $0.1 million invested in the company at the end of the quarter.
Let’s also examine hedge fund activity in other stocks similar to Bank of Commerce Holdings (NASDAQ:BOCH). These stocks are Spero Therapeutics, Inc. (NASDAQ:SPRO), BP Prudhoe Bay Royalty Trust (NYSE:BPT), Shore Bancshares, Inc. (NASDAQ:SHBI), and WildBrain Ltd. (NASDAQ:DHXM). This group of stocks’ market valuations are closest to BOCH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SPRO | 7 | 32359 | -1 |
| BPT | 3 | 1306 | -2 |
| SHBI | 3 | 12669 | -1 |
| DHXM | 4 | 57459 | 0 |
| Average | 4.25 | 25948 | -1 |
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 $26 million. That figure was $12 million in BOCH’s case. Spero Therapeutics, Inc. (NASDAQ:SPRO) is the most popular stock in this table. On the other hand BP Prudhoe Bay Royalty Trust (NYSE:BPT) is the least popular one with only 3 bullish hedge fund positions. Bank of Commerce Holdings (NASDAQ:BOCH) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 BOCH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BOCH were disappointed as the stock returned 5.1% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
