Banc of California, Inc. (BANC): Are Hedge Funds Right About This Stock?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Banc of California, Inc. (NYSE:BANC) based on that data and determine whether they were really smart about the stock.

Banc of California, Inc. (NYSE:BANC) investors should be aware of a decrease in enthusiasm from smart money in recent months. BANC was in 10 hedge funds’ portfolios at the end of the first quarter of 2020. There were 14 hedge funds in our database with BANC holdings at the end of the previous quarter. Our calculations also showed that BANC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Michael Price MFP Investors

Michael Price of MFP Investors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s analyze the recent hedge fund action regarding Banc of California, Inc. (NYSE:BANC).

What does smart money think about Banc of California, Inc. (NYSE:BANC)?

At Q1’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in BANC a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, MFP Investors was the largest shareholder of Banc of California, Inc. (NYSE:BANC), with a stake worth $10.7 million reported as of the end of September. Trailing MFP Investors was Renaissance Technologies, which amassed a stake valued at $6.1 million. Castine Capital Management, Forest Hill Capital, and Seidman Investment Partnership were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Seidman Investment Partnership allocated the biggest weight to Banc of California, Inc. (NYSE:BANC), around 3.19% of its 13F portfolio. Castine Capital Management is also relatively very bullish on the stock, dishing out 3.03 percent of its 13F equity portfolio to BANC.

Judging by the fact that Banc of California, Inc. (NYSE:BANC) has witnessed bearish sentiment from hedge fund managers, logic holds that there were a few hedgies that elected to cut their entire stakes last quarter. Interestingly, Israel Englander’s Millennium Management sold off the biggest position of the 750 funds watched by Insider Monkey, worth about $12.6 million in stock, and Tom Brown’s Second Curve Capital was right behind this move, as the fund cut about $9.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Banc of California, Inc. (NYSE:BANC) but similarly valued. These stocks are Crescent Point Energy Corp (NYSE:CPG), Green Brick Partners Inc (NASDAQ:GRBK), Cadiz Inc (NASDAQ:CDZI), and Capstead Mortgage Corporation (NYSE:CMO). This group of stocks’ market caps resemble BANC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CPG 10 11861 -4
GRBK 19 228386 2
CDZI 8 13652 -3
CMO 12 47986 0
Average 12.25 75471 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $33 million in BANC’s case. Green Brick Partners Inc (NASDAQ:GRBK) is the most popular stock in this table. On the other hand Cadiz Inc (NASDAQ:CDZI) is the least popular one with only 8 bullish hedge fund positions. Banc of California, Inc. (NYSE:BANC) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on BANC as the stock returned 36.2% during the second quarter and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.