Is SMMF Stock A Buy?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Summit Financial Group, Inc. (NASDAQ:SMMF) to find out whether there were any major changes in hedge funds’ views.

Is SMMF stock a buy? Summit Financial Group, Inc. (NASDAQ:SMMF) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that SMMF isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare SMMF to other stocks including DSP Group, Inc. (NASDAQ:DSPG), Big 5 Sporting Goods Corporation (NASDAQ:BGFV), and Farmland Partners Inc (NYSE:FPI) to get a better sense of its popularity.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Jeffrey Gendell of Tontine Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s analyze the latest hedge fund action encompassing Summit Financial Group, Inc. (NASDAQ:SMMF).

Do Hedge Funds Think SMMF Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 2 hedge funds with a bullish position in SMMF a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Renaissance Technologies has the biggest position in Summit Financial Group, Inc. (NASDAQ:SMMF), worth close to $6.8 million, amounting to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Fourthstone LLC, managed by Phil Stone, which holds a $3.4 million position; 1.7% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions contain Jeffrey Gendell’s Tontine Asset Management, Roger Ibbotson’s Zebra Capital Management and . In terms of the portfolio weights assigned to each position Fourthstone LLC allocated the biggest weight to Summit Financial Group, Inc. (NASDAQ:SMMF), around 1.69% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, designating 0.24 percent of its 13F equity portfolio to SMMF.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Winton Capital Management. 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 only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Zebra Capital Management).

Let’s now review hedge fund activity in other stocks similar to Summit Financial Group, Inc. (NASDAQ:SMMF). We will take a look at DSP Group, Inc. (NASDAQ:DSPG), Big 5 Sporting Goods Corporation (NASDAQ:BGFV), Farmland Partners Inc (NYSE:FPI), Kaleido BioSciences, Inc. (NASDAQ:KLDO), Uxin Limited (NASDAQ:UXIN), Village Super Market, Inc. (NASDAQ:VLGEA), and Cardiff Oncology, Inc. (NASDAQ:CRDF). This group of stocks’ market values are closest to SMMF’s market value.

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As you can see these stocks had an average of 8.7 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $11 million in SMMF’s case. Big 5 Sporting Goods Corporation (NASDAQ:BGFV) is the most popular stock in this table. On the other hand Uxin Limited (NASDAQ:UXIN) is the least popular one with only 3 bullish hedge fund positions. Summit Financial Group, Inc. (NASDAQ:SMMF) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SMMF is 39.5. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately SMMF wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SMMF investors were disappointed as the stock returned -11.8% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

Disclosure: None. This article was originally published at Insider Monkey.