We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Meridian Bancorp, Inc. (NASDAQ:EBSB).
Meridian Bancorp, Inc. (NASDAQ:EBSB) shareholders have witnessed a decrease in hedge fund sentiment of late. Our calculations also showed that EBSB isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a peek at the recent hedge fund action encompassing Meridian Bancorp, Inc. (NASDAQ:EBSB).
What have hedge funds been doing with Meridian Bancorp, Inc. (NASDAQ:EBSB)?
Heading into the third quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in EBSB a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in Meridian Bancorp, Inc. (NASDAQ:EBSB) was held by Renaissance Technologies, which reported holding $36.2 million worth of stock at the end of March. It was followed by Impax Asset Management with a $23.7 million position. Other investors bullish on the company included Castine Capital Management, D E Shaw, and Arrowstreet Capital.
Judging by the fact that Meridian Bancorp, Inc. (NASDAQ:EBSB) has faced a decline in interest from the entirety of the hedge funds we track, we can see that there were a few hedge funds that decided to sell off their full holdings last quarter. At the top of the heap, Bain Capital’s Brookside Capital dropped the largest investment of all the hedgies monitored by Insider Monkey, valued at close to $1.8 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund sold off about $0.4 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 4 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Meridian Bancorp, Inc. (NASDAQ:EBSB). We will take a look at GasLog Partners LP (NYSE:GLOP), Vocera Communications Inc (NYSE:VCRA), Boot Barn Holdings Inc (NYSE:BOOT), and ePlus Inc. (NASDAQ:PLUS). This group of stocks’ market caps match EBSB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GLOP | 5 | 17752 | 1 |
| VCRA | 14 | 52283 | -3 |
| BOOT | 22 | 185590 | -1 |
| PLUS | 12 | 27761 | 3 |
| Average | 13.25 | 70847 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $84 million in EBSB’s case. Boot Barn Holdings Inc (NYSE:BOOT) is the most popular stock in this table. On the other hand GasLog Partners LP (NYSE:GLOP) is the least popular one with only 5 bullish hedge fund positions. Meridian Bancorp, Inc. (NASDAQ:EBSB) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on EBSB, though not to the same extent, as the stock returned 5.2% during the third quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
