Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Hope Bancorp, Inc. (NASDAQ:HOPE).
Is Hope Bancorp, Inc. (NASDAQ:HOPE) a bargain? Hedge funds are in an optimistic mood. The number of long hedge fund bets improved by 5 recently. Our calculations also showed that HOPE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). HOPE was in 19 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 14 hedge funds in our database with HOPE holdings at the end of the previous quarter.
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 monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Mario Gabelli of GAMCO Investors
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the latest hedge fund action surrounding Hope Bancorp, Inc. (NASDAQ:HOPE).
How are hedge funds trading Hope Bancorp, Inc. (NASDAQ:HOPE)?
At the end of the fourth quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 36% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in HOPE a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Pzena Investment Management held the most valuable stake in Hope Bancorp, Inc. (NASDAQ:HOPE), which was worth $50.9 million at the end of the third quarter. On the second spot was GAMCO Investors which amassed $8.8 million worth of shares. Renaissance Technologies, Citadel Investment Group, and Millennium Management 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 Pzena Investment Management allocated the biggest weight to Hope Bancorp, Inc. (NASDAQ:HOPE), around 0.24% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, setting aside 0.21 percent of its 13F equity portfolio to HOPE.
Now, specific money managers have jumped into Hope Bancorp, Inc. (NASDAQ:HOPE) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most valuable position in Hope Bancorp, Inc. (NASDAQ:HOPE). Arrowstreet Capital had $1.1 million invested in the company at the end of the quarter. Qing Li’s Sciencast Management also made a $0.4 million investment in the stock during the quarter. The other funds with brand new HOPE positions are Mika Toikka’s AlphaCrest Capital Management, Donald Sussman’s Paloma Partners, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s check out hedge fund activity in other stocks similar to Hope Bancorp, Inc. (NASDAQ:HOPE). We will take a look at Tricida, Inc. (NASDAQ:TCDA), Redwood Trust, Inc. (NYSE:RWT), Group 1 Automotive, Inc. (NYSE:GPI), and Portola Pharmaceuticals Inc (NASDAQ:PTLA). This group of stocks’ market valuations resemble HOPE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TCDA | 24 | 780285 | 7 |
| RWT | 13 | 95921 | -5 |
| GPI | 22 | 173892 | 1 |
| PTLA | 27 | 221821 | 4 |
| Average | 21.5 | 317980 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $318 million. That figure was $86 million in HOPE’s case. Portola Pharmaceuticals Inc (NASDAQ:PTLA) is the most popular stock in this table. On the other hand Redwood Trust, Inc. (NYSE:RWT) is the least popular one with only 13 bullish hedge fund positions. Hope Bancorp, Inc. (NASDAQ:HOPE) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately HOPE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); HOPE investors were disappointed as the stock returned -48.1% during the same time period 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 most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
