Here is What Hedge Funds Think About HomeStreet Inc (HMST)

Is HomeStreet Inc (NASDAQ:HMST) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy league graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments (for some reason media paid a ton of attention to Ackman’s gigantic JC Penney and Valeant failures) and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is HomeStreet Inc (NASDAQ:HMST) the right investment to pursue these days? Investors who are in the know are turning less bullish. The number of bullish hedge fund positions decreased by 1 in recent months. 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 First Trust High Income Long/short Fund (NYSE:FSD), SunCoke Energy, Inc (NYSE:SXC), and Helix Energy Solutions Group Inc. (NYSE:HLX) to gather more data points.

With all of this in mind, we’re going to analyze the latest action encompassing HomeStreet Inc (NASDAQ:HMST).

What have hedge funds been doing with HomeStreet Inc (NASDAQ:HMST)?

At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the most valuable position in HomeStreet Inc (NASDAQ:HMST). Renaissance Technologies has a $4.4 million position in the stock, comprising less than 0.1% of its 13F portfolio. On Renaissance Technologies’s heels is Consector Capital, led by William Black, holding a $3.1 million position; the fund has 3.5% of its 13F portfolio invested in the stock. Other peers that are bullish include Ken Fisher’s Fisher Asset Management, Andy Redleaf’s Whitebox Advisors and Cliff Asness’s AQR Capital Management.

Since HomeStreet Inc (NASDAQ:HMST) has experienced declining sentiment from hedge fund managers, we can see that there exists a select few hedge funds that elected to cut their positions entirely heading into Q4. It’s worth mentioning that Richard Driehaus’ Driehaus Capital dumped the biggest investment of the 700 funds watched by Insider Monkey, comprising close to $1.1 million in stock, and John Fichthorn’s Dialectic Capital Management was right behind this move, as the fund sold off about $0.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as HomeStreet Inc (NASDAQ:HMST) but similarly valued. These stocks are First Trust High Income Long/short Fund (NYSE:FSD), SunCoke Energy, Inc (NYSE:SXC), Helix Energy Solutions Group Inc. (NYSE:HLX), and Anworth Mortgage Asset Corporation (NYSE:ANH). This group of stocks’ market values are similar to HMST’s market value.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $17 million in HMST’s case. SunCoke Energy, Inc (NYSE:SXC) is the most popular stock in this table. On the other hand First Trust High Income Long/short Fund (NYSE:FSD) is the least popular one with only 6 bullish hedge fund positions. HomeStreet Inc (NASDAQ:HMST) 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. In this regard SXC might be a better candidate to consider a long position.