Is Lakeland Bancorp, Inc. (LBAI) A Good Stock to Buy?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Lakeland Bancorp, Inc. (NASDAQ:LBAI) has seen an increase in activity from the world’s largest hedge funds in recent months. LBAI was in 8 hedge funds’ portfolios at the end of the third quarter of 2016. There were 7 hedge funds in our database with LBAI holdings at the end of the second 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 Newpark Resources Inc (NYSE:NR), HomeStreet Inc (NASDAQ:HMST), and Sapiens International Corporation N.V. (NASDAQ:SPNS) 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 have hedgies been trading Lakeland Bancorp, Inc. (NASDAQ:LBAI)?

Heading into the fourth quarter of 2016, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 14% uptick from the second quarter of 2016. On the other hand, there were a total of 9 hedge funds with a bullish position in LBAI at the beginning of this year, so hedge fund ownership is still down a touch in 2016. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Matthew Lindenbaum’s Basswood Capital has the largest position in Lakeland Bancorp, Inc. (NASDAQ:LBAI), worth close to $10.1 million. On Basswood Capital’s heels is Renaissance Technologies, one of the largest hedge funds in the world, holding a $2.7 million position. Some other members of the smart money that are bullish consist of Amy Minella’s Cardinal Capital, David E. Shaw’s D E Shaw, and Israel Englander’s Millennium Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-micro-cap stocks.

Consequently, key money managers have jumped into Lakeland Bancorp, Inc. (NASDAQ:LBAI) headfirst. Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, established the largest position in Lakeland Bancorp, Inc. (NASDAQ:LBAI). Arrowstreet Capital had $0.3 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 Lakeland Bancorp, Inc. (NASDAQ:LBAI) but similarly valued. These stocks are Newpark Resources Inc (NYSE:NR), HomeStreet Inc (NASDAQ:HMST), Sapiens International Corporation N.V. (NASDAQ:SPNS), and Silver Bay Realty Trust Corp (NYSE:SBY). This group of stocks’ market values match LBAI’s market value.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $17 million in LBAI’s case. Silver Bay Realty Trust Corp (NYSE:SBY) is the most popular stock in this table. On the other hand Sapiens International Corporation N.V. (NASDAQ:SPNS) is the least popular one with only 5 bullish hedge fund positions. Lakeland Bancorp, Inc. (NASDAQ:LBAI) 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 SBY might be a better candidate to consider taking a long position in.

Disclosure: None