In this article you are going to find out whether hedge funds think Reliant Bancorp, Inc. (NASDAQ:RBNC) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Reliant Bancorp, Inc. (NASDAQ:RBNC) undervalued? Money managers were in an optimistic mood. The number of long hedge fund positions rose by 1 in recent months. Reliant Bancorp, Inc. (NASDAQ:RBNC) was in 3 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 5. Our calculations also showed that RBNC 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). There were 2 hedge funds in our database with RBNC holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Anton Schutz of Mendon Capital Advisors
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. Now let’s view the fresh hedge fund action encompassing Reliant Bancorp, Inc. (NASDAQ:RBNC).
What have hedge funds been doing with Reliant Bancorp, Inc. (NASDAQ:RBNC)?
At Q3’s end, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in RBNC over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Mendon Capital Advisors was the largest shareholder of Reliant Bancorp, Inc. (NASDAQ:RBNC), with a stake worth $2.5 million reported as of the end of September. Trailing Mendon Capital Advisors was JCSD Capital, which amassed a stake valued at $1.8 million. Renaissance Technologies 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 JCSD Capital allocated the biggest weight to Reliant Bancorp, Inc. (NASDAQ:RBNC), around 2.14% of its 13F portfolio. Mendon Capital Advisors is also relatively very bullish on the stock, designating 1.45 percent of its 13F equity portfolio to RBNC.
As one would reasonably expect, key money managers have been driving this bullishness. JCSD Capital, managed by Joseph P. Colmery and Steven J. Didion, established the biggest position in Reliant Bancorp, Inc. (NASDAQ:RBNC). JCSD Capital had $1.8 million invested in the company at the end of the quarter.
Let’s check out hedge fund activity in other stocks similar to Reliant Bancorp, Inc. (NASDAQ:RBNC). We will take a look at Neptune Wellness Solutions Inc (NASDAQ:NEPT), Xunlei Ltd (NASDAQ:XNET), DermTech, Inc. (NASDAQ:DMTK), Larimar Therapeutics, Inc. (NASDAQ:LRMR), Aceto Corporation (NASDAQ:ACET), MediciNova, Inc. (NASDAQ:MNOV), and Silicom Ltd. (NASDAQ:SILC). This group of stocks’ market values are similar to RBNC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NEPT | 5 | 41890 | 3 |
| XNET | 5 | 5302 | 0 |
| DMTK | 6 | 37635 | -1 |
| LRMR | 17 | 167530 | -1 |
| ACET | 7 | 89750 | 7 |
| MNOV | 5 | 2263 | 1 |
| SILC | 5 | 7269 | 0 |
| Average | 7.1 | 50234 | 1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.1 hedge funds with bullish positions and the average amount invested in these stocks was $50 million. That figure was $5 million in RBNC’s case. Larimar Therapeutics, Inc. (NASDAQ:LRMR) is the most popular stock in this table. On the other hand Neptune Wellness Solutions Inc (NASDAQ:NEPT) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Reliant Bancorp, Inc. (NASDAQ:RBNC) is even less popular than NEPT. Our overall hedge fund sentiment score for RBNC is 24. 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. Hedge funds clearly dropped the ball on RBNC as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 RBNC as the stock returned 24.5% since Q3 (through November 23rd) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
