Hedge Funds Are Crazy About OceanFirst Financial Corp. (OCFC)

Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

Is OceanFirst Financial Corp. (NASDAQ:OCFC) the right investment to pursue these days? Investors who are in the know are altogether becoming more confident. The number of long hedge fund investments increased by 2 in recent months. There were 13 hedge funds in our database with OCFC positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Universal American Corporation (NYSE:UAM), Sequential Brands Group Inc (NASDAQ:SQBG), and Entercom Communications Corp. (NYSE:ETM) to gather more data points.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

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With all of this in mind, let’s analyze the recent action regarding OceanFirst Financial Corp. (NASDAQ:OCFC).

What does the smart money think about OceanFirst Financial Corp. (NASDAQ:OCFC)?

At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards OCFC over the last 5 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, EJF Capital, led by Emanuel J. Friedman, holds the number one position in OceanFirst Financial Corp. (NASDAQ:OCFC). EJF Capital has a $29.3 million position in the stock, comprising 2.4% of its 13F portfolio. Sitting at the No. 2 spot is Jim Simons’ Renaissance Technologies, holding a $18.4 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism include Gregg J. Powers’ Private Capital Management, John D. Gillespie’s Prospector Partners and Matthew Lindenbaum’s Basswood Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now, key money managers were leading the bulls’ herd. Driehaus Capital, led by Richard Driehaus, established the largest position in OceanFirst Financial Corp. (NASDAQ:OCFC). Driehaus Capital had $0.7 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0.4 million position during the quarter. The only other fund with a brand new OCFC position is Tom Brown’s Second Curve Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as OceanFirst Financial Corp. (NASDAQ:OCFC) but similarly valued. We will take a look at Universal American Corporation (NYSE:UAM), Sequential Brands Group Inc (NASDAQ:SQBG), Entercom Communications Corp. (NYSE:ETM), and JinkoSolar Holding Co., Ltd. (NYSE:JKS). This group of stocks’ market caps are closest to OCFC’s market cap.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $79 million in OCFC’s case. Universal American Corporation (NYSE:UAM) is the most popular stock in this table. On the other hand, JinkoSolar Holding Co., Ltd. (NYSE:JKS) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks OceanFirst Financial Corp. (NASDAQ:OCFC) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: none