Here is What Hedge Funds Think About BBCN Bancorp, Inc. (BBCN)

The third quarter was a rough one for most investors, as fears of an interest rate hike in the U.S, a weakening economy in China, and a stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards BBCN Bancorp, Inc. (NASDAQ:BBCN), and what that likely means for the prospects of the company and its stock.

BBCN Bancorp, Inc. (NASDAQ:BBCN) was in 7 hedge funds’ portfolios at the end of the third quarter of 2015, having registered a decrease in activity from the world’s largest hedge funds of late. There were 8 hedge funds in our database with BBCN Bancorp, Inc. (NASDAQ:BBCN) 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 TopBuild Corp (NYSE:BLD), Talmer Bancorp Inc (NASDAQ:TLMR), and First Financial Bancorp (NASDAQ:FFBC) to gather more data points.

According to most stock holders, hedge funds are perceived as slow, outdated financial tools of yesteryear. While there are more than 8000 funds trading at present, our researchers hone in on the aristocrats of this group, around 700 funds. These investment experts administer the majority of the hedge fund industry’s total capital, and by keeping an eye on their top equity investments, Insider Monkey has developed a few investment strategies that have historically surpassed Mr. Market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Now, let’s view the latest action regarding BBCN Bancorp, Inc. (NASDAQ:BBCN).

Hedge fund activity in BBCN Bancorp, Inc. (NASDAQ:BBCN)

At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 13% from one quarter earlier. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Richard S. Pzena’s Pzena Investment Management has the number one position in BBCN Bancorp, Inc. (NASDAQ:BBCN), worth close to $34.5 million, comprising 0.2% of its total 13F portfolio. Sitting at the No. 2 spot is GAMCO Investors, managed by Mario Gabelli, which holds an $8.9 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish on BBCN include Sharif Siddiqui’s Alpenglow Capital, Ken Gray and Steve Walsh’s Bryn Mawr Capital, and Cliff Asness’ AQR Capital Management.

Because BBCN Bancorp, Inc. (NASDAQ:BBCN) has faced a declination in interest from the smart money, logic holds that there were a few hedgies who were dropping their entire stakes last quarter. Interestingly, Israel Englander’s Millennium Management dropped the largest position of the 700 funds followed by Insider Monkey, with a value close to $3.4 million. George Hall of Clinton Group was right behind this move, as his fund dumped about $0.6 million worth of shares. These moves are important to note, as the total hedge fund interest fell by 1 fund last quarter.

Let’s also examine hedge fund activity in other stocks similar to BBCN Bancorp, Inc. (NASDAQ:BBCN). We will take a look at TopBuild Corp (NYSE:BLD), Talmer Bancorp Inc (NASDAQ:TLMR), First Financial Bancorp (NASDAQ:FFBC), and ZIOPHARM Oncology Inc. (NASDAQ:ZIOP). This group of stocks’ market valuations is closest to BBCN Bancorp, Inc. (NASDAQ:BBCN)’s market valuation.

As you can see, these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $50 million in BBCN Bancorp, Inc. (NASDAQ:BBCN)’s case. TopBuild Corp (NYSE:BLD) is the most popular stock in this table. On the other hand, ZIOPHARM Oncology Inc. (NASDAQ:ZIOP) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks, BBCN Bancorp, Inc. (NASDAQ:BBCN) is even less popular than ZIOP. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.