Last year’s fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 37.4% in 2019 (through the end of November) and outperformed the S&P 500 ETF by 9.9 percentage points. We are done processing the latest 13F filings and in this article we will study how hedge fund sentiment towards BankFinancial Corporation (NASDAQ:BFIN) changed during the first quarter.
Is BankFinancial Corporation (NASDAQ:BFIN) ready to rally soon? Prominent investors are turning bullish. The number of long hedge fund positions rose by 1 lately. Our calculations also showed that BFIN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). BFIN was in 5 hedge funds’ portfolios at the end of the third quarter of 2019. There were 4 hedge funds in our database with BFIN positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 stocks that are in our short portfolio.
John Overdeck of Two Sigma Advisors
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to take a glance at the new hedge fund action surrounding BankFinancial Corporation (NASDAQ:BFIN).
Hedge fund activity in BankFinancial Corporation (NASDAQ:BFIN)
At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from one quarter earlier. By comparison, 4 hedge funds held shares or bullish call options in BFIN a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in BankFinancial Corporation (NASDAQ:BFIN), which was worth $12.6 million at the end of the third quarter. On the second spot was Winton Capital Management which amassed $0.6 million worth of shares. Millennium Management, Two Sigma Advisors, and PDT Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position PDT Partners allocated the biggest weight to BankFinancial Corporation (NASDAQ:BFIN), around 0.01% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to BFIN.
As one would reasonably expect, key hedge funds were breaking ground themselves. Winton Capital Management, managed by David Harding, initiated the largest position in BankFinancial Corporation (NASDAQ:BFIN). Winton Capital Management had $0.6 million invested in the company at the end of the quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as BankFinancial Corporation (NASDAQ:BFIN) but similarly valued. These stocks are IDEAYA Biosciences, Inc. (NASDAQ:IDYA), Zagg Inc (NASDAQ:ZAGG), Clipper Realty Inc. (NYSE:CLPR), and RADA Electronic Industries Ltd. (NASDAQ:RADA). This group of stocks’ market values match BFIN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IDYA | 9 | 32359 | 0 |
| ZAGG | 6 | 19642 | -5 |
| CLPR | 7 | 36891 | 0 |
| RADA | 2 | 3466 | -1 |
| Average | 6 | 23090 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $14 million in BFIN’s case. IDEAYA Biosciences, Inc. (NASDAQ:IDYA) is the most popular stock in this table. On the other hand RADA Electronic Industries Ltd. (NASDAQ:RADA) is the least popular one with only 2 bullish hedge fund positions. BankFinancial Corporation (NASDAQ:BFIN) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on BFIN as the stock returned 15.5% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
