Is Blue Hills Bancorp Inc (BHBK) A Good Stock To Buy?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the third quarter we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Blue Hills Bancorp Inc (NASDAQ:BHBK) to find out whether it was one of their high conviction long-term ideas.

Hedge fund interest in Blue Hills Bancorp Inc (NASDAQ:BHBK) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Sangamo Biosciences, Inc. (NASDAQ:SGMO), Donegal Group Inc (NASDAQ:DGICA), and Cascade Bancorp (NASDAQ:CACB) to gather more data points.

In the eyes of most investors, hedge funds are viewed as unimportant, outdated investment vehicles of years past. While there are greater than 8000 funds with their doors open today, Our researchers look at the leaders of this club, about 700 funds. These hedge fund managers watch over most of all hedge funds’ total capital, and by keeping an eye on their highest performing equity investments, Insider Monkey has unsheathed numerous investment strategies that have historically beaten Mr. Market. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Now, we’re going to analyze the new action surrounding Blue Hills Bancorp Inc (NASDAQ:BHBK).

How have hedgies been trading Blue Hills Bancorp Inc (NASDAQ:BHBK)?

At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the previous quarter. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Chuck Royce’s Royce & Associates has the most valuable position in Blue Hills Bancorp Inc (NASDAQ:BHBK), worth close to $9.7 million, amounting to 0.1% of its total 13F portfolio. Coming in second is EJF Capital, led by Emanuel J. Friedman, holding an $6.9 million position; 0.3% of its 13F portfolio is allocated to the company. Remaining peers that are bullish consist of Jim Simons’ Renaissance Technologies, Paul J. Isaac’s Arbiter Partners Capital Management and Michael M. Rothenberg’s Moab Capital Partners.

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 now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Blue Hills Bancorp Inc (NASDAQ:BHBK) but similarly valued. These stocks are Sangamo Biosciences, Inc. (NASDAQ:SGMO), Donegal Group Inc (NASDAQ:DGICA), Cascade Bancorp (NASDAQ:CACB), and FormFactor, Inc. (NASDAQ:FORM). This group of stocks’ market valuations match BHBK’s market valuation.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. While in BHBK’s case that figure stood at $25 million. Sangamo Biosciences, Inc. (NASDAQ:SGMO) is the most popular stock in this table, while Donegal Group Inc (NASDAQ:DGICA) is the least popular one with only 6 bullish hedge fund positions. Blue Hills Bancorp Inc (NASDAQ:BHBK) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard SGMO might be a better candidate to consider a long position.