Is Meridian Bancorp, Inc. (EBSB) Going to Burn These Hedge Funds?

Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the 12-month period ending October 30. However, 63% of hedge funds’ top 30 stock picks from the index did beat the market, and returned nearly twice as much on average as the index. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.

Meridian Bancorp, Inc. (NASDAQ:EBSB) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 16 hedge funds’ portfolios at the end of the third quarter of 2015. 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 Lakeland Financial Corporation (NASDAQ:LKFN), Ethan Allen Interiors Inc. (NYSE:ETH), and Radware Ltd. (NASDAQ:RDWR) to gather more data points.

At the moment there are a lot of methods investors employ to analyze publicly traded companies. A duo of the most innovative methods are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the elite fund managers can beat the market by a solid amount (see the details here).

With all of this in mind, we’re going to take a look at the latest action encompassing Meridian Bancorp, Inc. (NASDAQ:EBSB).

How have hedgies been trading Meridian  Bancorp, Inc. (NASDAQ:EBSB)?

Heading into Q4, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from one quarter earlier. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Phill Gross and Robert Atchinson’s Adage Capital Management has the number one position in Meridian Interstate Bancorp, Inc. (NASDAQ:EBSB), worth close to $36.2 million, amounting to 0.1% of its total 13F portfolio. Coming in second is EJF Capital, led by Emanuel J. Friedman, holding a $30.1 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions encompass Neil Chriss’ Hutchin Hill Capital, Jim Simons’ Renaissance Technologies, and Michael Kaine’s Numina Capital.

Seeing as Meridian Bancorp, Inc. (NASDAQ:EBSB) has witnessed a declination in interest from the smart money, logic holds that there lies a certain “tier” of hedge funds that decided to sell off their positions entirely in the third quarter. Intriguingly, Paul Orlin and Alex Porter’s Amici Capital sold off the biggest stake of all the hedgies tracked by Insider Monkey, totaling close to $6.5 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dumped about $0.8 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Meridian Bancorp, Inc. (NASDAQ:EBSB) but similarly valued. We will take a look at Lakeland Financial Corporation (NASDAQ:LKFN), Ethan Allen Interiors Inc. (NYSE:ETH), Radware Ltd. (NASDAQ:RDWR), and Inteliquent (NASDAQ:IQNT). All of these stocks’ market caps are closest to EBSB’s market cap.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $103 million. That figure was $131 million in EBSB’s case. Radware Ltd. (NASDAQ:RDWR) is the most popular stock in this table. On the other hand Lakeland Financial Corporation (NASDAQ:LKFN) is the least popular one with only 4 bullish hedge fund positions. Meridian Bancorp, Inc. (NASDAQ:EBSB) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard RDWR might be a better candidate to consider a long position.