At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Parke Bancorp, Inc. (NASDAQ:PKBK).
Is Parke Bancorp, Inc. (NASDAQ:PKBK) a healthy stock for your portfolio? The smart money was getting less optimistic. The number of long hedge fund positions decreased by 1 lately. Parke Bancorp, Inc. (NASDAQ:PKBK) was in 3 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 4. Our calculations also showed that PKBK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Roger Ibbotson of Zebra Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s take a glance at the recent hedge fund action regarding Parke Bancorp, Inc. (NASDAQ:PKBK).
How are hedge funds trading Parke Bancorp, Inc. (NASDAQ:PKBK)?
At third quarter’s end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the second quarter of 2020. On the other hand, there were a total of 3 hedge funds with a bullish position in PKBK a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Basswood Capital held the most valuable stake in Parke Bancorp, Inc. (NASDAQ:PKBK), which was worth $8 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $1.8 million worth of shares. Zebra Capital Management was 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 Basswood Capital allocated the biggest weight to Parke Bancorp, Inc. (NASDAQ:PKBK), around 0.67% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, setting aside 0.4 percent of its 13F equity portfolio to PKBK.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Royce & Associates. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified PKBK as a viable investment and initiated a position in the stock.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Parke Bancorp, Inc. (NASDAQ:PKBK) but similarly valued. We will take a look at Golar LNG Partners LP (NASDAQ:GMLP), Servicesource International Inc (NASDAQ:SREV), Lineage Cell Therapeutics, Inc. (NYSE:LCTX), Educational Development Corporation (NASDAQ:EDUC), Equillium, Inc. (NASDAQ:EQ), Penns Woods Bancorp, Inc. (NASDAQ:PWOD), and Western Copper and Gold Corporation (NYSE:WRN). All of these stocks’ market caps are similar to PKBK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GMLP | 7 | 12797 | 0 |
| SREV | 9 | 25005 | -2 |
| LCTX | 8 | 33137 | -4 |
| EDUC | 3 | 5771 | 2 |
| EQ | 5 | 11814 | 1 |
| PWOD | 1 | 3405 | 0 |
| WRN | 3 | 2356 | 1 |
| Average | 5.1 | 13469 | -0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.1 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $10 million in PKBK’s case. Servicesource International Inc (NASDAQ:SREV) is the most popular stock in this table. On the other hand Penns Woods Bancorp, Inc. (NASDAQ:PWOD) is the least popular one with only 1 bullish hedge fund positions. Parke Bancorp, Inc. (NASDAQ:PKBK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PKBK is 39. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on PKBK as the stock returned 21.3% since the end of the third quarter (through 11/23) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
