Here is What Hedge Funds Think About Eagle Bancorp Montana Inc (EBMT)

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Eagle Bancorp Montana Inc (NASDAQ:EBMT)? The smart money sentiment can provide an answer to this question.

Hedge fund interest in Eagle Bancorp Montana Inc (NASDAQ:EBMT) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that EBMT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare EBMT to other stocks including BiomX Inc. (NYSE:PHGE), Flux Power Holdings, Inc. (NASDAQ:FLUX), and Enochian Biosciences Inc. (NASDAQ:ENOB) to get a better sense of its popularity.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 115 percentage points since March 2017 (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.

Emanuel Friedman of EJF Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to take a peek at the key hedge fund action encompassing Eagle Bancorp Montana Inc (NASDAQ:EBMT).

Do Hedge Funds Think EBMT Is A Good Stock To Buy Now?

At first quarter’s end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in EBMT over the last 23 quarters. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, EJF Capital, managed by Emanuel J. Friedman, holds the most valuable position in Eagle Bancorp Montana Inc (NASDAQ:EBMT). EJF Capital has a $8.5 million position in the stock, comprising 0.6% of its 13F portfolio. The second largest stake is Renaissance Technologies, with a $4.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions contain David P. Cohen’s Minerva Advisors, Frederick DiSanto’s Ancora Advisors and . In terms of the portfolio weights assigned to each position EJF Capital allocated the biggest weight to Eagle Bancorp Montana Inc (NASDAQ:EBMT), around 0.61% of its 13F portfolio. Minerva Advisors is also relatively very bullish on the stock, setting aside 0.28 percent of its 13F equity portfolio to EBMT.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s also examine hedge fund activity in other stocks similar to Eagle Bancorp Montana Inc (NASDAQ:EBMT). These stocks are BiomX Inc. (NYSE:PHGE), Flux Power Holdings, Inc. (NASDAQ:FLUX), Enochian Biosciences Inc. (NASDAQ:ENOB), Vidler Water Resources, Inc. (NASDAQ:VWTR), Seanergy Maritime Holdings Corp. (NASDAQ:SHIP), RealNetworks Inc (NASDAQ:RNWK), and Zedge, Inc. (NYSE:ZDGE). This group of stocks’ market valuations match EBMT’s market valuation.

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As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $13 million in EBMT’s case. Vidler Water Resources, Inc. (NASDAQ:VWTR) is the most popular stock in this table. On the other hand Flux Power Holdings, Inc. (NASDAQ:FLUX) is the least popular one with only 1 bullish hedge fund positions. Eagle Bancorp Montana Inc (NASDAQ:EBMT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EBMT is 38.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately EBMT wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); EBMT investors were disappointed as the stock returned 1.6% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

Disclosure: None. This article was originally published at Insider Monkey.