Is TowneBank (TOWN) A Good Stock To Buy?

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.

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.