Is Southern First Bancshares, Inc. (SFST) A Good Stock To Buy?

Insider Monkey finished processing more than 700 13F filings made by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30. What do these smart investors think about Southern First Bancshares, Inc. (NASDAQ:SFST)?

Hedge fund interest in Southern First Bancshares, Inc. (NASDAQ:SFST) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare SFST to other stocks including L.B. Foster Company (NASDAQ:FSTR), Summit Therapeutics PLC (ADR) (NASDAQ:SMMT), and Cenveo, Inc. (NYSE:CVO) to get a better sense of its popularity.

At the moment there are a lot of tools stock market investors can use to assess stocks. A couple of the most under-the-radar tools are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the elite fund managers can outperform their index-focused peers by a healthy margin (see the details here).

With all of this in mind, let’s take a gander at the key action regarding Southern First Bancshares, Inc. (NASDAQ:SFST).

How are hedge funds trading Southern First Bancshares, Inc. (NASDAQ:SFST)?

At Q3’s end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Emanuel J. Friedman’s EJF Capital has the most valuable position in Southern First Bancshares, Inc. (NASDAQ:SFST), worth close to $10.4 million, accounting for 0.5% of its total 13F portfolio. The second most bullish fund manager is Basswood Capital, managed by Matthew Lindenbaum, which holds an $4.2 million position; 0.2% of its 13F portfolio is allocated to the company. Other peers that hold long positions encompass Paul Magidson, Jonathan Cohen and Ostrom Enders’s Castine Capital Management, and Anton Schutz’s Mendon Capital Advisors.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s also examine hedge fund activity in other stocks similar to Southern First Bancshares, Inc. (NASDAQ:SFST). These stocks are L.B. Foster Company (NASDAQ:FSTR), Summit Therapeutics PLC (ADR) (NASDAQ:SMMT), Cenveo, Inc. (NYSE:CVO), and Ignite Restaurant Group Inc (NASDAQ:IRG). All of these stocks’ market caps match SFST’s market cap.

As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $20 million in SFST’s case. L.B. Foster Company (NASDAQ:FSTR) is the most popular stock in this table. On the other hand Summit Therapeutics PLC (ADR) (NASDAQ:SMMT) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Southern First Bancshares, Inc. (NASDAQ:SFST) is as less popular as SMMT. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.