Should You Buy Green Bancorp Inc (GNBC)?

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.

Green Bancorp Inc (NASDAQ:GNBC) was in 6 hedge funds’ portfolios at the end of September. GNBC investors should be aware of an increase in hedge fund sentiment recently. There were 5 hedge funds in our database with GNBC holdings at the end of the previous quarter. At the end of this article we will also compare GNBC to other stocks including First Defiance Financial (NASDAQ:FDEF), Blue Nile Inc (NASDAQ:NILE), and Franklin Financial Network Inc (NYSE:FSB) to get a better sense of its popularity.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

Now, let’s go over the recent action surrounding Green Bancorp Inc (NASDAQ:GNBC).

What have hedge funds been doing with Green Bancorp Inc (NASDAQ:GNBC)?

Heading into the fourth quarter of 2016, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GNBC over the last 5 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, has the biggest stake in Green Bancorp Inc (NASDAQ:GNBC), worth close to $2.2 million, accounting for less than 0.1% of its total 13F portfolio. Coming in second is Neil Chriss of Hutchin Hill Capital, with a $1.1 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining peers that are bullish include J. Alan Reid, Jr.’s Forward Management, D. E. Shaw’s D E Shaw and Israel Englander’s Millennium Management. We should note that Forward Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Consequently, one key money manager has jumped into Green Bancorp Inc (NASDAQ:GNBC) headfirst. Israel Englander’s Millennium Management established the the only new position in Green Bancorp Inc (NASDAQ:GNBC) among the funds we follow. According to its latest 13F filing, the fund had $0.1 million invested in the company at the end of the quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Green Bancorp Inc (NASDAQ:GNBC) but similarly valued. These stocks are First Defiance Financial (NASDAQ:FDEF), Blue Nile Inc (NASDAQ:NILE), Franklin Financial Network Inc (NYSE:FSB), and Conyers Park Acquisition Corp. (NASDAQ:CPAA). This group of stocks’ market caps resemble GNBC’s market cap.

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 $84 million. That figure was $4 million in GNBC’s case. Conyers Park Acquisition Corp. (NASDAQ:CPAA) is the most popular stock in this table. On the other hand First Defiance Financial (NASDAQ:FDEF) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Green Bancorp Inc (NASDAQ:GNBC) is even less popular than FDEF. 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.

Disclosure: None