Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Is HarborOne Bancorp, Inc. (NASDAQ:HONE) a buy, sell, or hold? Investors who are in the know are reducing their bets on the stock. The number of bullish hedge fund positions decreased by 2 in recent months. Our calculations also showed that HONE isn’t among the 30 most popular stocks among hedge funds.
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 market by 32 percentage points since May 2014 through March 12, 2019 (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 our short portfolio.
Let’s take a peek at the key hedge fund action regarding HarborOne Bancorp, Inc. (NASDAQ:HONE).
How have hedgies been trading HarborOne Bancorp, Inc. (NASDAQ:HONE)?
At the end of the fourth quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the previous quarter. On the other hand, there were a total of 4 hedge funds with a bullish position in HONE a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Royce & Associates was the largest shareholder of HarborOne Bancorp, Inc. (NASDAQ:HONE), with a stake worth $4.4 million reported as of the end of December. Trailing Royce & Associates was Renaissance Technologies, which amassed a stake valued at $1.9 million. GRT Capital Partners and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Since HarborOne Bancorp, Inc. (NASDAQ:HONE) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there exists a select few funds that decided to sell off their positions entirely heading into Q3. Interestingly, John Overdeck and David Siegel’s Two Sigma Advisors sold off the largest stake of the 700 funds tracked by Insider Monkey, comprising an estimated $0.3 million in stock. Frederick DiSanto’s fund, Ancora Advisors, also dropped its stock, about $0.1 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 2 funds heading into Q3.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as HarborOne Bancorp, Inc. (NASDAQ:HONE) but similarly valued. We will take a look at Shoe Carnival, Inc. (NASDAQ:SCVL), Domo Inc. (NASDAQ:DOMO), Boston Omaha Corporation (NASDAQ:BOMN), and Global Indemnity Limited (NASDAQ:GBLI). This group of stocks’ market caps resemble HONE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SCVL | 19 | 71747 | 4 |
| DOMO | 13 | 76502 | -2 |
| BOMN | 4 | 168150 | 0 |
| GBLI | 5 | 43521 | -2 |
| Average | 10.25 | 89980 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $7 million in HONE’s case. Shoe Carnival, Inc. (NASDAQ:SCVL) is the most popular stock in this table. On the other hand Boston Omaha Corporation (NASDAQ:BOMN) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks HarborOne Bancorp, Inc. (NASDAQ:HONE) is even less popular than BOMN. Hedge funds dodged a bullet by taking a bearish stance towards HONE. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately HONE wasn’t nearly as popular as these 15 stock (hedge fund sentiment was very bearish); HONE investors were disappointed as the stock returned 13.7% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.