We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the government. The 13F filings show the funds’ and investors’ portfolio positions as of September 30. In this article, we look at what those funds think of TowneBank (NASDAQ:TOWN) based on that data.
TowneBank (NASDAQ:TOWN) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged, which is somewhat surprising as the stock was up 21.59% during the third quarter. The stock was in 8 hedge funds’ portfolios at the end of September. Considering a dormant hedge fund reaction, our team decided to cover hedge funds holding positions in the company.
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 iKang Healthcare Group Inc (ADR) (NASDAQ:KANG), Bob Evans Farms Inc (NASDAQ:BOBE), and Ingles Markets, Incorporated (NASDAQ:IMKTA) to gather more data points.
To most traders, hedge funds are assumed to be slow, outdated investment tools of yesteryear. While there are more than 8000 funds with their doors open at the moment, Our researchers choose to focus on the top tier of this club, approximately 700 funds. These money managers orchestrate the lion’s share of all hedge funds’ total asset base, and by shadowing their inimitable stock picks, Insider Monkey has figured out a number of investment strategies that have historically exceeded Mr. Market. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
Now, let’s check out the fresh action surrounding TowneBank (NASDAQ:TOWN).
How are hedge funds trading TowneBank (NASDAQ:TOWN)?
Heading into Q4, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from the second quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, MFP Investors, managed by Michael Price, holds the biggest position in TowneBank (NASDAQ:TOWN). MFP Investors has a $21.5 million position in the stock, comprising 3.2% of its 13F portfolio. On MFP Investors’ heels is Renaissance Technologies, with a $10.4 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism include Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC, Anton Schutz’s Mendon Capital Advisors, and Roger Ibbotson’s Zebra Capital Management.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Two Sigma Advisors. 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 here because only one of the 700+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).
Let’s check out hedge fund activity in other stocks similar to TowneBank (NASDAQ:TOWN). These stocks are iKang Healthcare Group Inc (ADR) (NASDAQ:KANG), Bob Evans Farms Inc (NASDAQ:BOBE), Ingles Markets, Incorporated (NASDAQ:IMKTA), and Caesars Acquisition Company (NASDAQ:CACQ). This group of stocks’ market valuations resemble TowneBank (NASDAQ:TOWN)’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KANG | 8 | 38770 | -5 |
| BOBE | 22 | 238940 | 4 |
| IMKTA | 11 | 95460 | -3 |
| CACQ | 13 | 212974 | 3 |
As you can see, these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $147 million. That figure was $36 million in TowneBank (NASDAQ:TOWN)’s case. Bob Evans Farms Inc (NASDAQ:BOBE) is the most popular stock in this table. On the other hand, iKang Healthcare Group Inc (ADR) (NASDAQ:KANG) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks, TowneBank (NASDAQ:TOWN) is even less popular than iKang Healthcare Group Inc (ADR) (NASDAQ:KANG). 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.
