Is Clifton Savings Bancorp, Inc. (CSBK) a Good Stock to Buy?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Clifton Savings Bancorp, Inc. (NASDAQ:CSBK).

Clifton Savings Bancorp, Inc. (NASDAQ:CSBK) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 12 hedge funds’ portfolios at the end of September. 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 Independent Bank Corporation(MI) (NASDAQ:IBCP), Clearside Biomedical Inc (NASDAQ:CLSD), and Southwest Bancorp, Inc. (NASDAQ:OKSB) to gather more data points.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

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How are hedge funds trading Clifton Savings Bancorp, Inc. (NASDAQ:CSBK)?

Heading into the fourth quarter of 2016, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in CSBK over the last 5 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, has the number one position in Clifton Savings Bancorp, Inc. (NASDAQ:CSBK), worth close to $19.7 million. The second largest stake is held by Lawrence Seidman of Seidman Investment Partnership, with a $6.2 million position; 4.3% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish consist of Chuck Royce’s Royce & Associates, Michael Price’s MFP Investors and John D. Gillespie’s Prospector Partners. We should note that MFP Investors is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s now review hedge fund activity in other stocks similar to Clifton Savings Bancorp, Inc. (NASDAQ:CSBK). We will take a look at Independent Bank Corporation(MI) (NASDAQ:IBCP), Clearside Biomedical Inc (NASDAQ:CLSD), Southwest Bancorp, Inc. (NASDAQ:OKSB), and Pennantpark Floating Rate Capital Ltd (NASDAQ:PFLT). All of these stocks’ market caps are closest to CSBK’s market cap.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $45 million in CSBK’s case. Independent Bank Corporation(MI) (NASDAQ:IBCP) is the most popular stock in this table. On the other hand Clearside Biomedical Inc (NASDAQ:CLSD) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Clifton Savings Bancorp, Inc. (NASDAQ:CSBK) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None