“October lived up to its scary reputation—the S&P 500 falling in the month by the largest amount in the last 40 years, the only worse Octobers being ’08 and the Crash of ’87. For perspective, there have been only 5 occasions in those 40 years when the S&P 500 declined by greater than 20% from peak to trough. Other than the ’87 Crash, all were during recessions. There were 17 other instances, over the same time frame, when the market fell by over 10% but less than 20%. Furthermore, this is the 18th correction of 5% or more since the current bull market started in March ’09. Corrections are the norm. They can be healthy as they often undo market complacency—overbought levels—potentially allowing the market to base and move even higher.” This is how Trapeze Asset Management summarized the recent market moves in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.
Peapack-Gladstone Financial Corp (NASDAQ:PGC) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 15 hedge funds’ portfolios at the end of the fourth quarter of 2018. 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 Sierra Wireless, Inc. (NASDAQ:SWIR), CEVA, Inc. (NASDAQ:CEVA), and Navios Maritime Containers L.P. (NASDAQ:NMCI) to gather more data points.
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 flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a glance at the fresh hedge fund action surrounding Peapack-Gladstone Financial Corp (NASDAQ:PGC).
How are hedge funds trading Peapack-Gladstone Financial Corp (NASDAQ:PGC)?
Heading into the first quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in PGC a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Peapack-Gladstone Financial Corp (NASDAQ:PGC) was held by Basswood Capital, which reported holding $26.6 million worth of stock at the end of December. It was followed by Endicott Management with a $12.6 million position. Other investors bullish on the company included Royce & Associates, Renaissance Technologies, and Mendon Capital Advisors.
Due to the fact that Peapack-Gladstone Financial Corp (NASDAQ:PGC) has experienced a decline in interest from hedge fund managers, logic holds that there lies a certain “tier” of hedgies that slashed their positions entirely last quarter. At the top of the heap, Ken Griffin’s Citadel Investment Group dumped the biggest stake of the 700 funds tracked by Insider Monkey, comprising close to $0.7 million in stock, and Thomas Bailard’s Bailard Inc was right behind this move, as the fund said goodbye to about $0.6 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Peapack-Gladstone Financial Corp (NASDAQ:PGC) but similarly valued. We will take a look at Sierra Wireless, Inc. (NASDAQ:SWIR), CEVA, Inc. (NASDAQ:CEVA), Navios Maritime Containers L.P. (NASDAQ:NMCI), and Griffon Corporation (NYSE:GFF). This group of stocks’ market valuations are similar to PGC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SWIR | 10 | 38469 | 2 |
| CEVA | 10 | 23018 | 3 |
| NMCI | 4 | 16567 | 4 |
| GFF | 14 | 78189 | -1 |
| Average | 9.5 | 39061 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $76 million in PGC’s case. Griffon Corporation (NYSE:GFF) is the most popular stock in this table. On the other hand Navios Maritime Containers L.P. (NASDAQ:NMCI) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Peapack-Gladstone Financial Corp (NASDAQ:PGC) is more popular among hedge funds. 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 PGC wasn’t nearly as popular as these 15 stock and hedge funds that were betting on PGC were disappointed as the stock returned 5.6% 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.
