Is BNC Bancorp (BNCN) A Good Stock To Buy?

World-class money managers like Bill Ackman and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.

BNC Bancorp (NASDAQ:BNCN) was in 13 hedge funds’ portfolios at the end of the third quarter of 2015. BNC Bancorp (NASDAQ:BNCN) investors should be aware of a decrease in activity from the world’s largest hedge funds recently. There were 14 hedge funds in our database with BNC Bancorp (NASDAQ:BNCN) positions at the end of the previous quarter. It might be of surprise to the investors who are in the know, considering an increase of 15% in the share prices of the company. In order to find out more about the hedge fund sentiment, we will discuss hedgies that held positions in BNC Bancorp (NASDAQ:BNCN), at the end of the last quarter.

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 Civitas Solutions Inc (NYSE:CIVI), E-House (China) Holdings Limited (ADR) (NYSE:EJ), and Terreno Realty Corporation (NYSE:TRNO) to gather more data points.

Today, there are numerous metrics market participants can use to assess stocks. A couple of the most under-the-radar metrics are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the elite money managers can outperform their index-focused peers by a very impressive amount (see the details here).

Keeping this in mind, let’s take a gander at the recent action surrounding BNC Bancorp (NASDAQ:BNCN).

What does the smart money think about BNC Bancorp (NASDAQ:BNCN)?

At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 7% from the second quarter. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Mark Lee’s Forest Hill Capital has the largest position in BNC Bancorp (NASDAQ:BNCN), worth close to $38.8 million, accounting for 3.7% of its total 13F portfolio. The second largest stake is held by Fred Cummings of Elizabeth Park Capital Management, with a $11.9 million position; the fund has 3.9% of its 13F portfolio invested in the stock. Remaining peers with similar optimism contain Bernard Horn’s Polaris Capital Management, Anton Schutz’s Mendon Capital Advisors, and Renaissance Technologies.

Since BNC Bancorp (NASDAQ:BNCN) has faced a declining sentiment from the smart money, logic holds that there were a few fund managers who sold off their entire stakes by the end of the third quarter. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management dropped the largest stake of the “upper crust” of funds watched by Insider Monkey, valued at an estimated $0.3 million in stock. Chao Ku’s fund, Nine Chapters Capital Management, also dumped its stock, about $0.2 million worth of shares. These transactions are interesting, as total hedge fund interest dropped by 1 fund by the end of the third quarter.

Let’s go over hedge fund activity in other stocks similar to BNC Bancorp (NASDAQ:BNCN). We will take a look at Civitas Solutions Inc (NYSE:CIVI), E-House (China) Holdings Limited (ADR) (NYSE:EJ), Terreno Realty Corporation (NYSE:TRNO), and PHH Corporation (NYSE:PHH). All of these stocks’ market caps resemble BNC Bancorp (NASDAQ:BNCN)’s market cap.

As you can see, these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $91 million. That figure was $97 million in BNC Bancorp (NASDAQ:BNCN)’s case. PHH Corporation (NYSE:PHH) is the most popular stock in this table. On the other hand, Civitas Solutions Inc (NYSE:CIVI) is the least popular one with only 7 bullish hedge fund positions. BNC Bancorp (NASDAQ:BNCN) 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, PHH Corporation (NYSE:PHH) might be a better candidate to consider a long position.