Does Bridgewater Bancshares, Inc. (NASDAQ:BWB) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Bridgewater Bancshares, Inc. (NASDAQ:BWB) was in 10 hedge funds’ portfolios at the end of the third quarter of 2019. BWB has seen an increase in hedge fund sentiment recently. There were 6 hedge funds in our database with BWB holdings at the end of the previous quarter. Our calculations also showed that BWB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the fresh hedge fund action encompassing Bridgewater Bancshares, Inc. (NASDAQ:BWB).
Hedge fund activity in Bridgewater Bancshares, Inc. (NASDAQ:BWB)
Heading into the fourth quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 67% from the second quarter of 2019. On the other hand, there were a total of 7 hedge funds with a bullish position in BWB a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
The largest stake in Bridgewater Bancshares, Inc. (NASDAQ:BWB) was held by EJF Capital, which reported holding $14.3 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $4.8 million position. Other investors bullish on the company included Marshall Wace, Arrowstreet Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position EJF Capital allocated the biggest weight to Bridgewater Bancshares, Inc. (NASDAQ:BWB), around 1.95% of its 13F portfolio. AlphaOne Capital Partners is also relatively very bullish on the stock, dishing out 0.58 percent of its 13F equity portfolio to BWB.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Marshall Wace, managed by Paul Marshall and Ian Wace, assembled the biggest position in Bridgewater Bancshares, Inc. (NASDAQ:BWB). Marshall Wace had $1.2 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.6 million investment in the stock during the quarter. The following funds were also among the new BWB investors: David E. Shaw’s D E Shaw, David Harding’s Winton Capital Management, and Israel Englander’s Millennium Management.
Let’s check out hedge fund activity in other stocks similar to Bridgewater Bancshares, Inc. (NASDAQ:BWB). These stocks are Homeowners Choice Inc (NYSE:HCI), Artesian Resources Corporation (NASDAQ:ARTNA), Vera Bradley, Inc. (NASDAQ:VRA), and Consolidated Communications Holdings Inc (NASDAQ:CNSL). This group of stocks’ market valuations match BWB’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HCI | 12 | 26431 | 1 |
| ARTNA | 3 | 17330 | 0 |
| VRA | 15 | 56748 | -1 |
| CNSL | 20 | 19802 | 6 |
| Average | 12.5 | 30078 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $24 million in BWB’s case. Consolidated Communications Holdings Inc (NASDAQ:CNSL) is the most popular stock in this table. On the other hand Artesian Resources Corporation (NASDAQ:ARTNA) is the least popular one with only 3 bullish hedge fund positions. Bridgewater Bancshares, Inc. (NASDAQ:BWB) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on BWB, though not to the same extent, as the stock returned 7% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
